yC-NRLF 


B    3    b3M    mo 


■LIBRARY 

OF    THE 

UNIVERSITY  OF  CALIFORNIA. 


Accession     98802 •    Class 


k 


LIBRARY  OF 
ECONOMICS  AND  POLITICS, 

EDITED    BY 
RICHARD  T.  ELY,  Ph.D.,  LL.D. 


A 


I 


LIBRARY    OF    ECONOMICS   AND   POLITICS. 

RICHARD  T.    ELY,   Ph.D.,  LL.D.,  Editor. 


NUMBER  TWO 


THE 

REPUDIATION  OF  STATE  DEBTS 

A   STUDY 

IN  THE  FINANCIAL  HISTORY 


MISSISSIPPI,  FLORIDA,  ALABAMA,  NORTH  CAROLINA,  SOUTH 
CAROLINA,   GEORGIA,   LOUISIANA,  ARKANSAS, 
TENNESSEE,  MINNESOTA,  MICHI- 
GAN, AND  VIRGINIA. 


BY 

WILLIAM   A.  SCOTT,  Ph.D., 

Assistant  Professor  of  Political  Economy  in  thb  Univkrsity 
OF  Wisconsin. 


NEW  YORK:  46  East  Fourteenth  Street. 

THOMAS    Y.    CROVVELL    &    CO. 

BOSTON:  joo  Purchase  Street. 


■1-'^ 


^''X<i 


GEW.ERAL 


Copyright,  1893, 
By  T.  Y.  Crowell  &  Co. 


PREFACE. 


The  field  of  financial  liistoiy  which  is  covered 
by  this  volume  has  been  lieretofore  left  almost 
entirely  uncultivated  by  students  of  American 
finance.  With  tlie  exception  of  an  article  by 
Hon.  R.  P.  Porter  in  tlie  International  Review 
for  November,  1880,  and  another  contributed  to 
"  Lalor's  Cyclopaedia,"  by  Geoige  Walton  Green, 
and  afterwards  expanded  by  the  Society  for  Politr 
ical  Education,  as  Economic  Ti-act  No.  11,  very 
little  has  been  written  upon  it.  Neitlier  of  tliese 
articles  furnishes  a  statement  of  facts  complete 
and  exhaustive  enough  to  form  the  basis  of  ac- 
curate scientific  judgments,  and  botli  of  them  omit 
the  discussion  of  important  questions. 

The  present  volume  treats  of  four  main  topics. 
Chapter  I.  presents  those  features  of  our  consti- 
tutional law%  state  and  national,  which  bear  upon 
the  subject  of  the  repudiation  of  State  debts,  and 


98802 


VI  pheface. 

leads  to  the  conclusion  that  the  holder  of  a  repu- 
diated bond  has  no  efficient  means  for  enforcinor 

o 

the  payment  of  his  dues;  Chapters  II.  to  VI.,  inclu- 
sive, describe  with  considerable  detail  the  history 
of  the  various  acts  of  repudiation  passed  by  the 
twelve  States  named  on  the  title-page;  Chapter 
VII.  attempts  a  scientific  interpretation  and  ex- 
planation of  the  facts  presented;  and  the  closing 
chapter  contains  a  critical  discussion  of  various 
remedies  for  the  evil  of  State  defalcation  and 
financial  dishonesty. 

Tlie  term  repudiation  as  herein  employed  in- 
cludes cases  of  the  "  scaling "  of  debts  and  of 
refusal  to  pay  bonds  which  were  not  valid  obliga- 
tions of  the  States,  either  from  a  moral  or  a  legal 
standpoint.  It  may  perhaps  be  objected  that  such 
an  extension  of  the  term  is  not  justified  by  ordi- 
nary usage ;  and  that  the  compromise  of  a  debt  on 
terms  which  reduce  the  principal  and  interest,  or 
the  refusal  to  pay  bonds  which  are  claimed  to  rep- 
resent a  just  debt  but  do  not^  cannot  in  justice  be 
termed  repudiation.  Though  the  autlior  has  no 
desire  to  attempt  t©  justify  so  broad  an  extension 
of  the  meaning  of  the  term  on  grounds  of  deriva- 
tion or  usage,  it  has  seemed  to  him  proper  to  use 
it  on  the  title-page  and  elsewhere  as  generally  and 


PREFACE.  vii 

broadly  descriptive  of   the  class  of  financial  acts 
herein  treated. 

I  am  under  special  obligations  to  Mr.  J.  R. 
Berryman,  Librarian  of  the  State  Law  Library 
of  Wisconsin,  and  to  the  officials  of  the  State 
Historical  Library  of  Wisconsin,  and  of  the  Con- 
gressional Library  at  Washington,  for  their  kind- 
ness in  placing  freely  at  my  disposal  the  documents 
without  a  study  of  whicli  this  book  would  have 
been  impossible ;  also  to  Mr.  Cliarles  N.  Gregory, 
and  Mr.  David  Kinley,  of  Madison,  Wis.,  for  read- 
ing parts  of  my  manuscript  and  making  many  val- 
uable suggestions. 

William  A.  Scott. 

Madison,  Wis.,  April  7, 1893. 


CONTENTS. 


PAGE 

Preface v 

CHAPTER 

I.     The  Constitutional  and  Legal  Aspects  of 
Repudiation 

II.  Repudiation    in   Mississippi,    Florida,    and 

A  LA  RAMA 33 

III.  Repudiation  in  North  Carolina  and  South 

Carolina 'IT 

IV.  Repudiation    in    Georgia,    Louisiana,    and 

Arkansas 07 

V.     Repudiation  in  Tennessee,  Minnesota,  and 

Michigan !•>! 

VI.     Repudiation  in  Vihoinia         ....     107 

VII.     Causes  of  Repudiation IW 

VIII.     Remedies  for  Repudiation    .         .         .         .241 

APPENDIX 

I.     Sources  of  Information         ....    265 
n.     Statistical  Tables 275 

III.  Extracts   from   the  Charter  of  the  Mis- 

sissippi Union  Bank  and  the  Act  supple- 
mentary thereto -''^ 

i.K 


X  CONTENTS. 

APPENDIX  PAGE 

IV.    Extracts   from   the    McCulloch,  Riddle- 

BERGER,     AND     DeBT-SETTLEMENT     AcTS     OF 

Virginia 281 

V.  Extracts  from  the  Internal  Improvements 
AND  the  Debt-settlement  Acts  of  Ten- 
nessee   301 

VI.  Extracts  from  the  "  Report  of  the  Joint 
Investigating  Committee  on  Public 
Frauds,  an*d  Election  of  Hon.  J.  J.  Pat- 
terson TO  the  United  States  Senate, 
made  to  the  General  Assembly  of  South 
Carolina  at  the  Regular  Session,  1877- 
V8» 313 

Index 319 


THE   CONSTITUTIONAL  AND   LEGAL 
ASPECTS   OF   REPUDIATION. 


REPUDIATION  of  STATE  DEBTS 


CHAPTER  I. 


THE  CONSTITUTIONAL  AND  LEGAL  ASPECTS  OF 
REPUDIATION. 

The  study  of  the  chapter  of  financial  history 
which  constitutes  the  subject  of  this  book,  properly 
begins  with  an  investigation  into  the  rights  and 
privileges  of  the  States  of  the  American  Union 
relative  to  the  payment  or  non-payment  of  their 
debts.  We  naturally  ask  at  the  very  outset 
whether  repudiation  is  in  any  way  connected  witli 
the  defects  in  our  constitutional  and  legal  system, 
or  whether  it  has  happened  in  spite  of  the  best 
possible  laws. 

The  Federal  Constitution  and  the  laws  of  the 
States  themselves  are  the  sources  whence  an  answer 
to  these  questions  must  be  derived.  We  will  begin 
with  the  former. 

As  originally  adopted,  the  Constitution  of  the 
United  States  contained  two  provisions  which  have 

3 


4  REPUDIATION  OF  STATE  DEBTS. 

a  bearing  on  this  subject.  One,  in  Section  10  of 
Article  I.,  prohibits  a  State  from  passing  any  law 
''impairing  the  obligation  of  contracts,"  and  the 
other,  in  Section  2,  Article  III.,  provides  that  the 
judicial  power  of  the  United  States  shall  extend 
"  to  controversies  between  two  or  more  States ; 
between  a  State  and  citizens  of  another  State; 
between  citizens  of  different  States ;  between  citi- 
zens of  the  same  State  claiming  lands  under  grants 
of  different  States ;  and  between  a  State  or  the 
citizens  thereof  and  foreign  States,  citizens,  or 
subjects." 

The  meaning  of  these  two  clauses  in  the  present 
connection  at  first  sight  seems  clear.  The  casual 
reader,  uninitiated  in  the  technicalities  of  the  law, 
would  affirm  unhesitatingly  that  the  first  one  made 
it  unlawful  for  a  State  to  repudiate  her  just  debts, 
and  that  the  second  one  provided  that  in  case  she 
did  thus  incriminate  herself,  she  could  be  brought 
to  justice  before  the  federal  courts.  However,  a 
more  careful  examination  of  the  precise  language 
used  in  the  "  contract  clause,"  as  the  first  one  is 
called,  reveals  several  difficulties.  In  the  first 
place,  it  does  not  expressly  state  whether  the  con- 
tracts referred  to  are  those  of  private  individuals, 
of  States,  or  of  both.  The  natural  inference  is 
that  it  refers  to  all  contracts  by  whomsoever  made  ; 
but  the  "  natural  inference  "  is  not  always  the  one 
which  interested  parties  draw.  The  next  query 
concerns  the  meaning  of  the  expression  the  "  obli- 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.       5 

gation  of  contracts."  What  is  the  obligation  of  a 
contract?  This  being  explained,  we  ask  in  the 
third  place,  in  Avhat  ways  can  tKe  obligation  of  a 
contract  be  violated  ?  These  difficulties  must  be 
removed  before  we  can  be  sure  of  the  precise  bear- 
ing of  the  clause  in  question  on  the  subject  under 
discussion. 

Regarding  the  kinds  of  contracts  referred  to,  — 
whether  State  or  individual,  or  both,  —  the  decis- 
ions of  the  Supreme  Court  leave  no  room  for 
doubt.  They  are  unanimous  in  the  declaration 
that  the  clause  includes  cases  to  which  a  State  is  a 
party.  The  following  are  examples  of  these  decis- 
ions ;  In  the  case  of  the  State  of  New  Jersey  v. 
Wilson  ^  the  statement  is  made  that  the  contract 
clause  of  the  Constitution  "  extends  to  contracts 
to  which  a  State  is  a  party  as  well  as  to  contracts 
betAveen  individuals."  In  Providence  Bank  v.  Bil- 
lings 2  these  words  are  used  :  It  has  ''  been  settled 
that  a  contract  entered  into  between  a  State  and 
an  individual  is  as  fully  protected  by  the  tenth  sec- 
tion of  the  first  article  of  the  Constitution  as  a 
contract  betw^een  two  individuals."  The  decision 
in  the  case  of  Green  v.  Biddle^  states  that  "the 
Constitution  of  the  United  States  embraces  all  con- 
tracts, executed  or  executory,  Avhether  between  in- 
dividuals, or  between  a  State  and  individuals ;  and 
that  a  State  has  no  more  power  to  impair  an  obli- 

J  7  Cranch.  164^  166,        2  4  Put.  514,  560.       «  8  Wheat.  1,  84. 


6  REPUDIATION   OF  STATE  DEBTS. 

gation  into  which  she  herself  has  entered  than  she 
can  the  contracts  of  individuals."  These  and  other 
decisions^  which  might  be  quoted  leave  no  doubt 
concerning  the  constitutional  limitation  of  the  right 
of  States  to  impair  contracts  into  which  they  have 
entered. 

The  meaning  of  the  phrase  "  obligation  of  con- 
tracts "  is  settled  by  the  following  declarations  of 
the  Supreme  Court :  "  The  obligation  of  a  contract 
consists  in  its  binding  force  on  the  party  who  makes 
it.  This  depends  on  the  laws  in  existence  when  it 
is  made;  these  are  necessarily  referred  to  in  all 
contracts,  and  form  a  part  of  them  as  the  measure 
of  the  obligation  to  perform  them  by  the  one  party, 
and  the  right  acquired  by  the  other."  ^  Again  it 
says  :  "  The  obligation  of  a  contract,  in  the  consti- 
tutional sense,  is  the  means  provided  by  law  by 
which  it  can  be  enforced,  by  which  the  parties  can 
be  obliged  to  perform  it."  ^ 

These  decisions  clearly  indicate  that  the  value 
of  the  contract  clause  depends  upon  other  laws ; 
namely,  those  which  provide  for  the  enforcement 
of  contracts.  If  a  State  owes  a  debt,  her  obliga- 
tion seems  to  depend  entirely  upon  the  laws  in 
existence  for  the  enforcement  of  contracts  against 
States.     If  there  are  no  such  laws,  the  contract, 

1  Woodruff  V.  Trapnall,  10  How.  190,  207;  and  Wolf  v.  New 
Orleans,  103  U.  S.  358,  367. 

2  McCracken  v.  Hayward,  2  How.  608,  612. 

8  Louisiana  v.  New  Orleans,  102  U.  S-  203,  206. 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.       7 

though  legal,  is  really  worthless  if  the  State  sees 
fit  to  disregard  its  provisions. 

An  additional  light  is  thrown  upon  the  meaning 
and  significance  of  the  clause  in  question  by  the 
decisions  of  the  Supreme  Court,  which  define  the  va- 
rious methods  by  which  it  may  be  violated.  It  has 
been  well  established  by  the  precedents  of  this  court 
that  a  State  may  change  her  remedy  for  enforcing 
contracts,  provided  she  furnishes  in  the  new  as  effi- 
cient a  one  as  the  old.^  There  is  surely  nothing 
in  the  contract  clause  itself  which  could  prevent  this. 
It  simply  insists  that  a  change  of  remedy  shall  not 
impair  the  contract.  In  actual  practice,  however, 
it  has  been  very  difficult  to  draw  closely  the  line 
between  those  changes  of  remedy  which  impair 
contracts  and  those  which  do  not.  The  Supreme 
Court  has  recognized  this  difficulty,  and  in  the 
main  has  succeeded  in  protecting  the  right  of 
contracting  parties  to  as  efficient  a  remedy  as  ex- 
isted when  the  contract  was  made.  The  following 
quotation  will  indicate  the  practice  of  the  Supreme 
Court  on  this  point.  In  the  case  of  Bronson  v. 
Kinzie,2  Chief  Justice  Taney  said:  "  It  is  manifest 
that  the  obligation  of  a  contract,  and  the  rights  of 
a  party  under  it,  may  in  effect  be  destroyed  by 
denying  a  remedy  altogether,  or  may  be  seriously 

1  Antoni  v.  Greenhow,  107  U.  S.  769;  Mason  v.  Haile,  12 
Wheat.  370;  Bronson  r.  Kinzie,  1  How.  311;  Van  Hoffman  r. 
City  of  Quincy,  4  Wall.  535;  Louisiana  v.  Pilsbury,  105  U.  S.  278. 

2  See  above. 


8  BEPUDIATION  OF   STATE  DEBTS. 

impaired  by  burdening  the  proceedings  with  new 
conditions  and  restrictions,  so  as  to  make  the  rem- 
edy hardly  worth  pursuing.  And  no  one,  w^e  pre- 
sume, would  say  that  there  is  any  substantial 
difference  between  a  retrospective  law  declaring  a 
particular  contract  or  class  of  contracts  to  be  abro- 
gated and  void,  and  one  which  took  away  all  rem- 
edy to  enforce  them,  or  encumbered  it  with  condi- 
tions that  rendered  it  useless  or  impracticable  to 
pursue  it.  One  of  the  tests  that  a  contract  has 
been  impaired  is  that  its  value  has  by  legislation 
been  diminished.  It  is  not  by  the  Constitution  to 
be  impaired  at  all.  This  is  not  a  question  of  de- 
gree or  manner  or  cause,  but  of  encroacliing  in  any 
respect  on  its  obligation,  dispensing  with  any  part 
of  its  force."  ^ 

The  intent  of  the  Court  to  preserve  the  clause 
with  all  its  force  was  well  expressed  by  Justice 
Strong  in  Murray  v.  Charleston,^  when  he  said  :  ''It 
is  one  of  the  highest  duties  of  this  Court  to  take 
care  that  the  pi-ohibition  (against  impairment  of 
contracts)  shall  neither  be  invaded  nor  frittered 
away.  Complete  effect  must  be  given  to  it  in  all 
its  spirit."  In  spite  of  these  strong  statements, 
however,  in  one  important  case  in  which  a  State 
attempted  to  evade  her  obligations  by  changing  the 
remedy  for  their  enforcement,  the  Court  gave 
so  loose  and  broad  an  inteipretation  to  this   right 

1  6  How.  301,327. 

2  96  U.  S.  432,  438. 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.       9 

that  the  State  was  able  to  accomplish  her  pur- 
pose.^ 

In  view  of  these  decisions  of  the  Supreme  Court, 
there  can  be  no  doubt  concerning  the  meaning  of 
the  clause  in  question.  It  certainly  refers  to  the 
contracts  of  States  as  well  as  to  those  of  individu- 
als, and  it  lays  upon  the  former  a  strong  moral  obli- 
gation to  pay  their  just  debts.  By  itself,  however, 
the  clause  is  nothing  more  than  a  statement  of  what 
ought  not  to  be  done.  It  provides  no  means  of 
preventing  the  repudiation  of  debts,  and  even  when 
such  means  are  nominally  provided  by  statute,  the 
decision  of  the  Supreme  Court  to  the  effect  that  a 
remedy  may  be  changed,  provided  in  so  doing  the 
contract  be  not  impaired,  may  give  rise  to  techni- 
calities under  cover  of  which  a  dishonest  State  may 
escape  her  just  obligations. 

At  this  point  it  becomes  necessary  to  inquire 
concerning  the  remedies  provided  for  the  enforce- 
ment of  the  contracts  of  delinquent  States.  The 
ability  of  the  defrauded  creditor  to  obtain  his 
rights  depends  entirely  upon  these.  As  we  have 
seen,  a  State  has  no  legal  or  moral  right  to  refuse 
to  pay  her  just  debts ;  but  the  question  of  impor- 
tance is,  what  can  be  done  in  case  she  does  refuse. 

The  clause  —  quoted  above  from  the  Constitution 
as  originally  adopted  —  seemed  to  imply  tliat  a  delin- 
quent State  could  be  brought  before  the  bar  of  the 
Supreme  Court  under  such  circumstances.     This 

1  See  Virginia  Coupon  Cases,  chap.  6,  p.  186. 


10  REPUDIATION   OF  STATE  DEBTS. 

would  certainly  have  been  a  first  step  towards  an 
efficient  remedy.  But  this  interpretation  of  the 
clause  was  questioned  even  before  the  Constitu- 
tion was  adopted.  A  controversy  on  this  very  point 
was  carried  on  in  the  States  when  this  instru- 
ment was  being  discussed  with  a  view  to  adoption. 
It  was  urged  by  many  that  it  authorized  any  citi- 
zen of  the  United  States  to  arraign  any  of  the 
States  except  his  own  at  the  bar  of  the  Supreme 
Court.  Patrick  Henry  was  a  prominent  represen- 
tative of  this  party,  and  he  said  that  the  expression 
"  controversies  between  a  State  and  citizens  of  an- 
other State"  applied  to  all  controversies,  whether 
the  State  were  plaintiff  or  defendant.  Opposed  to 
him  were  such  statesmen  as  Madison,  Marshall,  and 
Hamilton,  who  claimed  that  a  State  could  not  be 
sued  without  her  consent,  and  that  the  clause  in 
question  applied  only  to  the  States  as  plaintiffs. 
The  question  in  dispute  did  not  come  before  the 
Supreme  Court  until  1793.  In  that  year  Georgia 
was  arraigned  by  one  Chisholm,^  much  to  her  em- 
barrassment and  disgust,  and  the  Supreme  Court 
decided  that  the  case  was  proper  and  within  its 
jurisdiction  as  defined  by  Section  2,  Article  III.  of 
the  Constitution.  In  other  words,  it  supported  the 
proposition  that  an  individual  could  arraign  a  State 
before  the  bar  of  the  Supreme  Court. 

This  decision  caused  much  excitement  and  dis- 
content throughout  the  country.     The  legislature 

1  2  Dallas.  419. 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.     11 

of  Georgia  was  furious,  and  at  once  passed  an  act 
condemning  to  death  "  without  benefit  of  clergy, 
any  marshal  of  the  United  States,  or  other  pei*son, 
who  should  presume  to  serve  any  process  against 
that  State  at  the  suit  of  an  individual; "  and  when 
the  State  of  Massacliusetts  was  sued  soon  after, 
Governor  Hancock  convened  the  legislature,  and 
that  body  resolved  to  take  no  notice  of  the  suit. 
The  substantial  result  of  this  decision  was  agita- 
tion for  an  amendment  to  the  Constitution.  The 
next  session  of  Congress  took  the  matter  under 
consideration,  and  passed  by  a  large  majority  what 
is  now  known  as  the  eleventh  amendment.  The 
State  legislatures  without  exception  subsequently 
confirmed  it.  It  provides  that  "the  judicial  power 
of  the  United  States  shall  not  be  construed  to 
extend  to  any  suit  in  law  or  equity  commenced  or 
prosecuted  against  one  of  the  United  States  by 
the  citizens  of  another  State,  or  by  citizens  or  sub- 
jects of  any  foreign  State."  In  speaking  of  this 
amendment  in  the  case  of  Florida  v.  Georgia^  Mr. 
Justice  Campbell  said:  "Various  attempts  Avere 
made  in  both  brairehes  of  Congress  to  limit  the 
operation  of  the  amendment,  but  without  effect. 
It  was  accepted,  without  the  alteration  of  a  letter, 
by  a  vote  of  twenty-three  to  two  in  the  Senate, 
and  eighty-one  to  nine  in  the  House  of  Represen- 
tatives, and  received  the  assent  of  the  State  legis- 
latures.    Georgia   ratified  the   amendment  as  an 

»  17  Howard,  520. 


12  BEPUDIATION  OF  STATE  DEBTS, 

explanatory  article,  her  legislature  concurring 
therewith,  deeming  the  same  to  be  the  only  just 
and  true  construction  of  the  judicial  power  by 
which  the  rights  and  dignity  of  the  several  States 
can  be  effectively  secured.  Thus  the  supreme 
constitutional  jurisdiction  of  the  United  States, 
the  concurrent  action  of  Congress  and  the  State 
legislatures,  expressing  a  consent  almost  unsini- 
mous,  corrected  the  opinion  of  the  Supreme  Court, 
and  intercepted  its  final  judgments  in  these  cases 
by  declaring  that  the  Constitution  should  not  be 
so  construed  as  to  allow  them." 

This  amendment  brings  us  back  again  to  the 
original  question,  —  What  remedy  has  the  holder 
of  a  repudiated  bond  against  the  State  which  is  his 
debtor  ?  If  he  cannot  bring  suit  against  her,  what 
possible  method  remains  by  which  he  may  enforce 
his  rights  ?  Practically,  none.  The  Supreme 
Court,  however,  has  made  desperate  efforts  to 
provide  one  or  more,  and  these  must  now  be  ex- 
amined, although  their  real  utility  is  exceedingly 
small.  This  court  has  decided,  among  other  things, 
that  the  eleventh  amendment  applies  only  to  cases 
brought  by  individuals  against  States,  and  not  to 
cases  brought  by  States  against  individuals.  By 
virtue  of  this  decision,  the  federal  courts  may 
serve  as  a  shield  for  the  protection  of  the  individ- 
ual when  the  State  attempts  to  prosecute  him  un- 
justly, but  it  cannot  help  him  when  the  State  has 
already  done  him  a  wrong,  and  he  seeks  redress. 


CONSTITUTIONAL   AND  LEGAL   ASPECTS.     13 

This  point  was  elaborated  by  Chief  Justice  Mar- 
shall in  the  case  of  Cohens  v.  Virginia.^  In  this  case 
the  State  sued  Cohens  for  negotiating  United  States 
lottery  tickets  on  the  basis  of  a  Virginia  statute 
which  forbade  the  sale  of  such  tickets  in  the  State. 
The  State  courts  found  him  guilty,  and  fined  him. 
The  case  was  brought  before  the  Supreme  Court 
on  a  writ  of  error,  and  in  arguing  the  writ  it  was 
claimed  that  cases  between  a  State  and  one  of  her 
own  citizens  were  never  intended  to  be  cognizable 
in  the  federal  courts.  In  reply  to  this.  Chief  Jus- 
tice Marshall  said :  "  This  is  very  true,  so  far  as 
jurisdiction  depends  on  the  character  of  the  par- 
ties ;  and  the  ai-gument  would  have  great  force 
if  urged  to  prove  that  this  court  could  not  es- 
tablish the  demand  of  a  citizen  upon  the  State;  but 
it  is  not  entitled  to  the  same  force  when  urged  to 
prove  that  this  court  cannot  inquire  whetlier  the 
Constitution  or  laws  of  the  United  States  protect 
a  citizen  from  prosecution  instituted  against  him 
by  a  State."  To  establish  the  same  point,  the  case 
is  supposed  of  an  export  duty  being  levied  by  a 
State.  "  If  a  citizen  should  pay  such  a  tax,"  said 
the  Chief  Justice,  '^  and  then  sue  the  State  for  the 
recovery  of  his  money,  the  federal  courts  could 
not  protect  him.  But  if  he  refused  to  pay  the 
duty,  and  the  State  attempted  to  levy  upon  his 
property  or  entered  upon  judicial  proceedings 
against  him,  the  courts  of  the  United  States  could 

1  (>  Wheat.  391. 


14  BEPUniATION  OF  STATE  DEBTS. 

restrain  the  State  and  shield  the  man  from  harm." 
In  summing  up  his  argument,  Chief  Justice  Mar- 
shall said:  "  The  amendment,  therefore,  extends  to 
suits  commenced  or  prosecuted  by  individuals,  but 
not  to  those  brought  by  States."  Justice  Mat- 
thews in  the  case  of  Poindexter  v.  Greenhow  ^  con- 
curred in  this  opinion  in  the  following  passage 
quoted  from  his  decision :  "  This  immunity  from 
suit  secured  to  the  States  is  undoubtedly  a  part  of 
the  Constitution  of  equal  authority  with  every 
other,  but  no  greater,  and  to  be  construed  and 
applied  in  harmony  with  all  the  provisions  of  that 
instrument.  That  immunity,  however,  does  not 
exempt  the  State  from  the  operation  of  the  consti- 
tutional provision  that  no  State  shall  pass  any  law 
impairing  the  obligation  of  contracts;  for  it  has 
long  been  settled  that  contracts  between  a  State 
and  an  individual  are  as  full}-  protected  by  the 
Constitution  as  contracts  between  individuals.  It 
is  true  that  no  remedy  for  a  breach  of  its  contract 
by  a  State  by  way  of  damages  as  compensation,  or 
by  means  of  process  to  compel  its  performance,  is 
open,  under  the  Constitution,  in  the  courts  of  the 
United  States  by  a  direct  suit  against  the  State 
itself  on  the  part  of  the  injured  party,  being  a 
citizen  of  another  State,  or  a  citizen  or  subject  of 
a  foreign  State.  But  it  is  equally  true  that  when- 
ever in  a  controversy  between  parties  to  a  suit,  of 
which  these  courts  have  jurisdiction,  the  question 

1  114  U.  S.  286. 


CONSTITUTIONAL   AND  LEGAL  ASPECTS.    15 

arises  upon  the  validity  of  a  law  by  a  State  im- 
pairing the  obligation  of  its  contract,  the  juris- 
diction is  not  thereby  ousted,  but  must  be  exercised 
with  whatever  legal  consequences  to  the  rights  of 
the  litigants  may  be  the  result  of  the  determina- 
tion." ^ 

In  view  of  these  decisions  it  cannot  be  doubted 
that  States  can  be  brought  before  the  federal  courts 
in  suits  which  they  themselves  commence,  but  it 
is  doubtful  whether  this  fact  is  capable  of  bring- 
ing much  consolation  to  holders  of  repudiated 
bonds.  Only  under  exceptional  circumstances  can 
they  find  relief  in  this  fact,  for  it  is  seldom  that 
the  repudiation  of  debts  by  a  State  compels  her  to 
bring  suit  against  persons.  Such  acase,^  however, 
occurred  in  Virginia.  The  State  had  made  the" 
coupons  of  her  bonds  receivable  for  taxes  and  other 
dues ;  and,  after  her  repudiation,  she  refused  to 
receive  them,  and  levied  upon  the  property  of  those 
who  refused  to  pay  after  making  a  tender  of  their 
coupons.  This  was  a  case  in  point;  and  the  Su- 
preme Court  declared  that  a  tender  of  the  coupons 
released  the  citizen  from  further  obligation,  and 
that  the  law  forbidding  the  receipt  of  coupons  for 
taxes  was  unconstitutional. 


1  See  besides,  in  confirmation  of  this  point,  Fletcher  v.  Peck,  6 
Cranch.  87;  New  Jersey  v.  Wilson,  7  Cranch.  104;  Green  v.  Bid- 
die,  8  Wheat.  1,  84;  Providence  Bank  v.  Billings,  4  Pet.  514; 
Woodruff  V.  Trapnall,  10  How.  190;  Wolff  v.  New  Orleans,  103 
U.S.  358;  Jefferson  Branch  Bank  v.  Skelly,  1  Black,  436. 

2  Poindexter  v.  Greenhow,  114  U.  S.  270. 


16  BEPUDIATION   OF  STATE  DEBTS. 

A  second  source  of  relief  to  individuals  under 
certain  circumstances  is  suggested  in  those  passages 
of  the  decisions  quoted  which  make  it  possible  for 
the  Supreme  Court  to  decide  upon  the  constitu- 
tionality of  State  laws  which  may  be  involved  in 
suits  which  come  under  its  jurisdiction.  If  a  State 
law  is  once  declared  unconstitutional  by  the  Su- 
preme Court,  it  no  longer  possesses  binding  force, 
and  cannot  be  referred  to  by  courts  in  deciding 
cases,  or  be  pleaded  as  protection  by  State  officers 
whose  acts  may  be  called  in  question  by  injured 
persons.  In  the  case  of  Louisiana  v.  Pilsbury,^  it 
was  held  that  til e  legislation  of  a  State  impairing  the 
obligation  of  contracts  made  under  her  authority 
is  null  and  void  ;  and  the  courts,  in  enforcing  the 
contracts,  will  pursue  the  same  course  and  apply 
the  same  remedies  as  though  such  invalid  legisla- 
tion had  never  existed.  This  applies  to  laws  em- 
bodied in  State  constitutions  as  well  as  to  statute 
laws,  for  the  Supreme  Court  has  repeatedly  held 
that  the  constitution  of  a  State  is  a  law  within 
the  meaning  of  the  prohibition  that  no  State  shall 
pass  a  law  impairing  the  obligation  of  contracts.^ 
This  provision,  which  may  be  regarded  as  a  part 
of  our  constitutional  law,  has  an  important  bearing 

1  105  U.  S.  278. 

2  See  Miss.  &  Mo.  R.R.  Co.  v.  McClure,  10  "Wall.  511;  Mechan- 
ics &  Traders'  Bank  u.  Thomas,  18  How.  384;  White  u.  Hart,  13 
Wall.  640;  Detinas  v.  Merchants'  Mut.  Ins.  Co.,  14  Wall.  0(»r, 
Gunn  r.  Barry,  15  Wall.  010;  Davis  v.  Gray,  10  Wall.  203;  Fisk 
V.  Police  Jury,  116  U.  S.  13L 


CONSTITUTIONAL   AND   LEGAL   ASPECTS.     17 

on  the  subject  under  discussion  when  considered 
in  connection  with  the  right  of  individuals  to  sue 
State  officers  in  cases  in  which  they  could  not  sue 
the  States  directly.  This  right  inheres  in  precisely 
those  cases  in  which  a  State  officer  attempts  to  en- 
force an  unconstitutional  law.  Such  a  law  does 
not  exist,  according  to  the  interpretation  put  upon 
the  Constitution  by  the  Supreme  Court ;  and  an 
officer  who  attempts  to  enforce  it  makes  himself 
liable  to  the  charge  of  misdemeanor,  and  may  be 
prosecuted  and  punished. 

It  has  been  claimed  ^  that  in  all  cases  in  which 
the  eleventh  amendment  prohibits  a  State  from 
being  made  a  party  defendant  to  a  suit,  suit  may  be 
brought  against  the  officers  intrusted  with  the  ex- 
ecution of  the  law ;  but  it  is  hardly  possible  to  sup- 
port this  claim  with  clear  evidence  drawn  from  the 
decisions  of  the  Supreme  Court.  The  cases  usu- 
ally referred  to  in  support  of  this  view  do  not 
authorize  so  broad  a  generalization.  In  the  lead- 
ing one,  that  of  Osborn'v.  United  States  Bank 
(9  Wheat.  738),  suit  was  brought  to  restrain  the 
auditor  of  the  State  of  Ohio  from  levying  a  tax 
upon  the  United  States  Bank  in  pursuance  of  a 
statute  of  the  State  ordering  such  a  tax  to  be  col- 
lected. It  was  claimed  by  the  defendants  that 
the  case  could  not  be  entertained  b}-  the  Supreme 
Court  on  account  of  the  prohibition  contained  in 

1  D.  H.  Chamberlain  on  "The  Constitutionality  of  Repudia- 
tion," in  North  American  Review  for  March,1884. 


18  REPUDIATION   OF  STATE  DEBTS. 

the  eleventh  amendment.  In  answer  to  this  the 
Court  said:  "The  objection  is  that,  as  the  real 
party  cannot  be  brought  before  the  Court,  a  suit 
cannot  be  sustained  against  the  agents  of  that 
party ;  and  cases  have  been  cited  to  show  that  a 
Court  of  Chancery  will  not  make  a  decree  unless 
all  those  who  are  substantially  interested  be  made 
parties  to  the  suit.  This  is  certainly  true  where 
it  is  in  the  power  of  the  plaintiff  to  make  them 
parties;  but  if  the  person  who  is  the  real  principal, 
the  person  who  is  the  true  source  of  the  mischief, 
by  whose  power  and  for  whose  advantage  it  is 
done,  be  himself  above  the  law,  be  exempt  from 
all  judicial  process,  it  would  be  subversive  of  the 
best  established  principles  to  say  that  the  laws 
could  not  afford  the  same  remedies  against  the 
agent  employed  in  doing  the  wrong  which  they 
would  afford  against  him  could  his  principal  be 
joined  in  the  suit. 

In  the  case  of  Davis  v.  Gray  (16  Wall.  203)  this 
decision  was  confirmed  in  the  following  words :  — 

"  (1)  A  circuit  court  of  the  United  States  in  a 
proper  case  in  equity  may  enjoin  a  State  officer  from 
executing  a  State  law  in  conflict  with  the  Consti- 
tution or  a  statute  of  the  United  States,  when  such 
execution  will  violate  the  rights  of  the  complainant. 

"(2)  Where  the  State  is  concerned,  the  State 
should  be  made  a  party  if  it  could  be  done ;  that 
it  cannot  be  done  is  a  sufficient  reason  for  the  omis- 
sion to  do  it,  and  the  court  may  proceed  to  decree 


CONSTITUTIONAL   AND  LEGAL  ASPECTS.     19 

against  the  officers  of  the  State  in  all  respects  as  if 
the  State  were  a  party  to  the  record." 

A  second  confirmation  of  this  opinion  was  made 
in  the  case  of  Board  of  Liquidation  et  al.  v. 
McComb  (92  U.  S.  531)  in  the  following  words : 
"  On  this  branch  of  the  subject  the  numerous  and 
well-considered  cases  heretofore  decided  by  this 
court  leave  little  to  be  said.  The  objections  to 
proceeding  against  State  officers  by  mandamus  or 
injunction  are :  first,  that  it  is,  in  effect,  proceed- 
ing against  the  State  itself;  and,  secondly,  that  it 
interferes  with  the  official  discretion  vested  in  the 
officers.  It  is  conceded  that  neither  of  these  things 
can  be  done.  A  State,  without  its  consent,  cannot" 
be  sued  by  an  individual  i  and  a  court  cannot  sub- 
stitute its  own  discretion  for  that  of  executive 
officers  in  matters  belonging  to  the  proper  jurisdic- 
tion of  the  latter.  But  it  has  been  well  settled 
that  when  a  plain  official  duty,  requiring  no  exer- 
cise of  discretion,  is  to  be  performed,  and  per- 
formance is  refused,  any  person  who  will  sustain 
personal  injury  by  such  refusal  may  have  a  manda- 
mus to  compel  its  performance  ;  and  when  such 
duty  is  threatened  to  be*violated  by  some  positive 
official  act,  an}^  person  who  will  sustain  personal 
injury  thereby,  for  which  adequate  compensation 
cannot  be  had  at  law,  may  have  an  injunction  to 
prevent  it.  In  such  cases  the  writs  of  mandamus 
and  injunction  are  somewhat  correlative  to  each 
other.     In   either   case,    if   the   officer   plead    the 


20  REPUDIATION   OF  .STATE  DEBTS. 

authority  of  an  unconstitutional  law  for  the  non- 
performance or  violation  of  his  duty,  it  will  not 
prevent  the  issuing  of  the  writ.  An  vmconstitu- 
tional  law  will  be  treated  by  the  courts  as  null  and 
void." 

That  the  Supreme  Court  did  not  intend  in  these 
cases  to  lay  down  the  principal  that  State  officers 
may  be  made  parties  defendant  to  a  suit  in  all  cases 
in  which  the  State  could  not  be  sued  is  evident 
from  the  decision  in  the  case  of  Louisiana  v.  Jumel 
(107  U.  S.  711),  in  which  the  above-mentioned 
cases  are  r^iewed,  and  the  following  statement 
subversive  of  the  principle  mentioned  is  made  ; 
"  The  remedy  sought,  in  order  to  be  complete, 
would  require  the  court  to  assume  all  the  execu- 
tive authority  of  the  State,  so  far  as  it  reLated  to 
the  enforcement  of  this  law,  and  to  supervise  the 
conduct  of  all  persons  charged  with  any  official 
duty  in  respect  to  the  levy,  collection,  and  disburse- 
ment of  the  tax  in  question  until  the  bonds,  prin- 
cipal and  interest,  were  paid  in  full,  and  that,  too, 
in  a  proceeding  in  which  the  State,  as  a  State,  was 
not  and  could  not  be  made  a  party.  It  needs  no 
argument  to  show  that  the  political  power  cannot 
be  thus  ousted  of  its  jurisdiction,  and  the  judiciary 
set  in  its  place.  When  a  State  submits  itself, 
without  reservation,  to  the  jurisdiction  of  the 
court  in  a  particular  case,  tliat  jurisdiction  may  be 
used  to  give  full  effect  to  Avhat  the  State  has,  by  its 
active  submission,  allowed  to  be  done  ;  and  if  the 


CONSTITUTIONAL  AND   LEGAL   ASPECTS.    21 

law  permits  coercion  of  the  public  officers  to  en- 
force any  judgment  that  may  be  rendered,  then 
such  coercion  may  be  employed  for  that  purpose. 
But  this  is  very  far  from  authorizing  the  court, 
when  a  State  cannot  be  sued,  to  set  up  its  juris- 
diction over  the  officers  in  charge  of  the  public 
moneys,  so  as  to  control  them,  as  against  the  polit- 
ical power  in  their  administration  of.  the  finances 
of  the  State." 

It  is  certainly  impossible  to  draw  any  sharp  line 
of  distinction  between  State  officers  executing  the 
laws  and  the  State  herself.  The  officers  represent 
the  State,  and  constitute  the  State  for  all  practical 
purposes.  But  when  a  given  enactment  is  uncon- 
stitutional, it  is  no  more  a  law  than  if  it  had  never 
been  passed,  and  officers  must  regard  it  as  null 
and  void,  any  attempt  on  their  part  to  enforce  it 
falling  in  the  same  category  as  any  other  official 
act  not  warranted  by  law.  This  conclusion  is  the 
only  one  which  is  capable  of  harmonizing  the 
Supreme  Court  decisions,  and  which  is  supported 
by  reason.  The  eleventh  amendment  would  be  a 
dead  letter  if  State  officials  could  be  sued  in  the 
federal  courts  in  all  cases  in  which  the  State  herself 
would  be  the  natural  defendant;  but  no  legal  prin- 
ciple is  violated  if  an  official  be  sued  for  acts 
which  the  laws  of  his  State  or  of  the  United  States 
did  not  warrant  him  in  performing. 

From  this  decision  it  appears,  then,  that  the  bar- 
riers of  the  eleventh  amendment  have  been  pierced 


22  BEPUDIATION  OF  STATE  DEBTS. 

at  only  two  points :  It  does  not  prevent  the  fed- 
eral courts  from  entertaining  cases  brought  by 
States  against  individuals,  and  it  does  not  prevent 
these  courts  from  pronouncing  an  opinion  concern- 
ing the  constitutionality  of  State  laws  which  may 
be  involved  in  cases  which  come  under  their  juris- 
diction, and  from  thus  restraining  State  officers 
from  executing  unconstitutional  laws. 

We  are  now  prepared  to  answer  the  question 
suggested  at  the  beginning  of  this  chapter ;  namely, 
What  protection  is  afforded  the  holder  of  a  repu- 
diated bond  by  the  federal  constitution  ?  We  have 
seen  that  the  contract  clause  —  which  is  plainly 
violated  when  a  State  passes  a  law  repudiating  a 
bond  —  is  no  protection  unless  an  adequate  remedy 
for  its  enforcement  be  provided.  We  have  seen 
also  that  Section  2,  Article  III.,  of  the  Constitution 
was  designed  to  afford  such  a  remedy  in  its  provis- 
ion that  States  could  be  sued  by  individuals  in  the 
federal  courts,  but  that  this  remed}^  was  practically 
taken  away  by  the  eleventh  amendment.  Suits  be- 
tween two  States  may  still  be  brought  before  the 
federal  courts,  and  both  New  York  ^  and  New  Hamp- 
shire attempted  without  avail  to  make  use  of  these 
rights  for  the  protection  of  bondholders  who  had 
been  defrauded  by  State  repudiation.  When 
Louisiana  passed  her  repudiation  acts,  both  these 
States  obtained  possession  of  certain  of  the  dishon- 
ored  bonds   of  their   citizens,    and    brought   suit 

1  108  U.  S.  7G. 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.     23 

against  Louisiana  in  the  Supreme  Court.  It  was 
decided,  however,  that  this  was  simply  an  attempt 
to  evade  the  eleventh  amendment,  and  consequently 
not  permissible.  There  is,  then,  no  remedy  pro- 
vided by  the  United  States  for  the  enforcement  of 
the  "  contract  clause  "  of  which  the  holder  of  a 
repudiated  bond  can  avail  himself.  Only  in  case 
the  State  makes  her  coupons  receivable  for  taxes, 
or  in  some  other  exceptional  way  leaves  the  door 
open  to  individuals  to  enter  suit  against  her,  can 
she  be  prevented  by  the  United  States  from  repu- 
diating all  her  debts,  and  inflicting  upon  individ- 
uals and  the  community  at  large  all  the  evils  which 
repudiation  involves. 

There  still  remain  for  us  to  consider  in  this 
chapter  the  remedies  afforded  by  the  States  them- 
selves in  case  of  an  attempted  repudiation.  It  is, 
of  course,  entirely  possible  for  a  State  to  submit 
herself  to  those  judicial  processes  to  which  persons 
are  submitted.  Just  as  a  person  may  be  brouglit  be- 
fore a  court  and  fined,  if  he  refuses  to  pay  his  honest 
debts,  so  a  State  may  by  law  provide  that  she  shall 
be  sued  by  creditors  who  have  grievances,  and 
direct  her  officers  to  pay  the  judgment  out  of  her 
treasury.  The  above-mentioned  evil  effects  of  the 
eleventh  amendment  might  be  for  the  most  part 
avoided,  if  all  the  States  of  our  Union  would  pro- 
vide in  this  manner  for  the  settlement  of  claims 
against  themselves.  Most  bondholders  would  con- 
sider themselves  safe,  if  they  could  present  their 


24  REPUDIATION  OF  STATE  DEBTS. 

bonds  to  a  court  of  justice  for  adjudication  regard- 
ing their  validity,  and  if  they  could  be  assured  that 
the  courts  were  possessed  of  powers  adequate  to 
the  enforcement  of  the  collection  of  a  tax  for  the 
payment  of  the  bonds  in  case  they  were  adjudged 
to  be  valid.  Our  States,  however,  have  not  as  a 
rule  seen  fit  to  confer  such  powers  upon  their 
courts.  Most  of  them  have  considered  it  beneath 
the  dignity  of  a  sovereign  to  stand  as  defendant  in 
a  suit  at  law.  It  has  been  taken  for  granted  that  a 
State  will  always  do  right,  and  that  it  is  tantamount 
to  admitting  that  the  sovereign  people  are  not 
always  to  be  trusted,  to  provide  for  their  being 
forced  by  a  court  of  justice  to  do  what  they  would 
not  do  voluntarily.  Such  an  admission,  it  has  also 
been  urged,  could  not  but  injure  the  national 
credit. 

From  the  standpoint  of  legislation^  on  this  sub- 
ject, our  States  fall  into  three  classed  i^hose  which 
have  entirely  ignored  the  matter  ;' those  whose  con- 
stitutions provide  that  the  legislature  may  deter- 
mine in  what  manner  suit  may  be  brought  against 
the  State ;  and  those  which  expressly  prohibit  the 
State  being  made  a  defendant  in  a  suit  at  law. 

In  constitutions  of  the  first  class  are  usually 
found  simply  restatements  of  the  prohibition  con- 
tained in  the  federal  constitution  against  the  im- 
pairment of  contracts.  This,  of  course,  amounts 
to  nothing  as  a  protection  to  persons  seeking  their 
rights.    To  the  second  class,  thirteen  of  our  States 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.     25 

belong.^  Of  these,  however,  only  five  —  Indiana, 
Mississippi,  Wisconsin,  Nebraska,  and  Nevada  — 
have  anything  approaching  adequate  legislation 
on  the  subject.  The  statutes  of  Indiana  provide 
that  suit  against  the  State  may  be  brought  in  the 
Superior  Court  of  Marion  County,  and  appealed  by 
either  party  to  the  Supreme  Court.  The  value  of 
this  privilege  is,  however,  considerably  diminished 
by  the  provision  that  "  whenever  by  final  decree  or 
judgment  of  said  superior  court  of  Marion  County, 
Ind.,  or  the  Supreme  Court,  a  sum  of  money  is 
adjudged  to  be  due  any  person  from  the  State  of 
Indiana,  no  execution  shall  issue  thereon,  but  said 
judgment  shall  draw  interest  at  the  rate  of  six 
per  cent  per  annum  from  the  date  of  the  adjourn- 
ment of  the  next  ensuing  session  of  the  General 
Assembly  until  an  appropriation  shall  have  been 
made  by  law  for  the  pa3anent  of  the  same,  and 
said  judgment  paid."  ^  The  statute  of  Mississippi 
resembles  this,  particularly  in  the  provision  that 
no  judgment  shall  be  paid  until  an  appropriation 
shall  have  been  made  by  the  legislature,^  and  the 

1  See  Pennsylvania  Constitution,  Art.  I.  Sec.  11;  Indiana 
C,  IV.  24;  Wisconsin  C,  IV.  27;  Nebraska  C,  VI.  22;  Dela- 
ware C,  I.  9;  Kentucky  C,  VIII.  fi;  Tennessee  C,  I.  17;  Cali- 
fornia C,  XX.  6;  Oregon  C,  IV.  24;  Nevada  C,  IV.  22;  South 
Carolina  C,  XIV.  4;  Mississippi  C,  IV.  21;  Florida  C,  IV.  19. 

2  Revised  Statutes  of  Indiana  (1892),  vol.  iii.  pp.  103,  104.  One 
section  expressly  exempts  from  the  operation  of  the  statute  the 
stock  issued  in  aid  of  the  "Wabash  and  Erie  Canal. 

3  See  Annotated  Code  of  Mississippi,  1892  (Thompson,  Dil- 
lard,  &  Campbell),  chap.  131. 


26  REPUDIATION  OF  STATE  DEBTS. 

experience  of  tliat  State  has  demonstrated  tliat  to 
leave  the  matter  of  paying  a  judgment  to  the  dis- 
cretion of  the  legislature  is  fatal  to  the  interests 
of  defrauded  bondholders.^ 

The  legislature  of  Wisconsin  has  made  a  similar 
provision  for  the  bringing  of  suits  against  that 
State.  Here,  however,  the  proceedings  come  in 
the  first  instance  before  the  Supreme  Court,  ques- 
tions of  fact,  however,  being  determined  by  some 
circuit  court.  This  State,  however,  makes  the 
decision  of  her  Supreme  Court  final  and  binding 
by  the  following  provision :  "  Whenever  a  final 
judgment  against  the  State  shall  be  obtained  in 
the  Supreme  Court,  it  shall  be  the  duty  of  the 
clerk  of  the  said  court  to  make  and  furnish  to 
the  Secretary  of  State  a  transcript  of  such  judg- 
ment, and  the  Secretary  of  State  shall,  thereupon, 
audit,  in  favor  of  the  person  so  obtaining  such 
judgment,  the  amount  of  damages  and  costs  there- 
in awarded,  and  shall  draw  his  warrant  on  the 
treasury  therefor.  There  is  hereby  appropriated 
from  the  State  treasury  out  of  any  money  there- 
in, not  otherwise  appropriated,  a  sum  sufficient 
to  carry  into  effect  the  provision  of  this  act  " 
(Statutes  of  Wisconsin,  1871,  vol.  ii.  pp.  1789- 
1791).  This  statute  would  be  all  that  could  be 
asked  in  behalf  of  State  creditors,  were  it  not  for 
the  following  clause  appended  to  a  section  of  the 
statute  which   prescribes    tlie   modus   operandi  of 

1  See  chap.  ii. 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.     27 

bringing  suit  against  the  State  :  "  Provided  always^ 
that  no  judgment  rendered  in  any  such  action  shall 
be  evidence  of  any  public  debt  against  the  State, 
nor  shall  the  State  be  held  liable  to  pay  any  such 
judgment,  or  any  part  thereof,  or  for  any  costs 
which  may  accrue  in  the  prosecution  thereof." 
Provisions  in  all  essentials  like  those  of  Wiscon- 
sin (the  last  one  quoted  being  accepted)  have 
been  made  by  the  legislature  of  Nebi-aska.^ 

The  legislature  of  Nevada  has  complied  with  the 
provision  of  her  constitution  only  to  the  extent  of 
allowing  the  State  to  be  sued  on  "  a  claim  .  .  . 
for  services  or  advances  authorized  by  laAV,  and  for 
which  an  appropriation  has  been  made,  but  of 
which  the  amount  has  not  been  fixed  by  law." 
If  the  Board  of  Examiners,  or  the  State  Comp- 
troller, refuse  to  allow  a  portion  of  such  claims, 
suit  can  be  brought  against  the  State  to  recover 
the  portion  thus  disallowed. ^ 

The  legislatures  of  other  States  wliose  constitu- 
tions express  a  willingness  to  allow  the  State  to  be 
sued,  with  one  exception,  have  let  the  matter  go 
by  default;  and  silence  of  the  statut^es  on  this 
point  has  been  interpreted  to  mean  that  the  State 
cannot  be  made  defendant  in  a  suit  at  law.^ 

The  exception  referred  to  is  that  of  the  legisla- 

1  See  Consolidated  Statutes  of  Nebraska  (1891),  Sec.  4307- 
4323. 

2  See  General  Statutes  of  Nevada,  1885  (Bailey  &  Ham- 
mond), Sec.  3895. 

«  See  People  v.  Talmage,  6  Cal.  258. 


28  BEPUDIATION  OF  STATE  DEBTS. 

ture  of  Tennessee,  which,  instead  of  providing 
how  suits  can  be  brought  against  the  State,  has 
declared  that  no  such  suits  shall  be  allowed  under 
any  circumstances.  Section  3507  of  the  code  of 
1884  (Millikin  &  Vertrees)  reads  as  follows:  "No 
court  in  the  State  of  Tennessee  has,  nor  shall 
hereafter  have,  any  power,  jurisdiction,  or  authority 
to  entertain  any  suit  against  the  State,  or  against 
any  officer  of  the  State,  acting  by  authority  of  the 
State,  with  a  view  to  reach  the  State,  its  treasury, 
funds  or  property  ;  and  all  such  suits  now  pending, 
or  hereafter  brought,  shall  be  dismissed  as  to  the 
State  or  such  officers  on  motion,  plea,  or  demurrer 
of  the  law  officer  of  the  State  or  counsel  employed 
by  the  State." 

Arkansas,  Alabama,  Illinois,  Virginia,  and  West 
Virginia  belong  to  the  third  class  above  mentioned. 
They  do  not  allow  themselves  to  be  sued.  The 
constitution  of  Arkansas,  Sec.  20,  Art.  V.,  reads  as 
follows :  "  The  State  of  Arkansas  shall  never  be 
made  defendant  in  any -of  her  courts."  That  of 
West  Virginia,  Art.  VI.  Sec.  35,  says  :  '"  The  State 
of  West  Virginia  shall  never  be  made  defendant 
in  any  court  of  law  or  equity."  The  provisions  in 
the  constitutions  of  the  other  States  are  in  every 
essential  respect  similar  to  these. 

North  Carolina  and  Michigan  are  exceptional 
cases  in  that  they  do  not  properly  belong  to  either 
of  the  three  classes  mentioned.  Tlie  constitution 
of  the  former  State,  Art.  IV.  Sec.  11,^  provides  for 

1  Constitution  of  18G8. 


CONSTITUTIONAL  AND  LEGAL  ASPECTS.     29 

'the  settlement  of  claims  by  the  Supreme  Court, 
but  adds  that  "  its  decisions  shall  be  merely  recom- 
mendatory ;  no  process  in  the  nature  of  execution 
shall  issue  thereon ;  they  shall  be  reported  to  the 
next  session  of  the  General  Assembly  for  its  ac- 
tion." In  the  constitution  of  Michigan  there  is  a 
provision  that  the  Secretary  of  State,  Treasurer,  and 
Commissioner  of  Lands  shall  constitute  a  board  for 
the  adjustment  of  claims  against  the  State.^  Such 
a  provision,  however,  is  of  little  value  unless  en- 
forced by  stringent  legislation  giving  this  board 
power  not  only  to  adjust  the  claims,  but  also  to 
draw  upon  the  treasury  for  their  payment.  It 
may  also  be  doubted  whether  this  provision  would 
cover  the  case  of  the  holder  of  a  repudiated 
bond. 

Other 'facts  or  arguments  are  not  necessary  to 
our  present  purpose.  A  brief  examination  of  the 
constitutional  or  statute  law  of  our  States  is  ade- 
quate to  show  tRat,  with  possibly  four  or  five  ex- 
ceptions, they  have  not  provided  for  the  protection 
of  defrauded  creditors.  Abundance  of  facts  given 
in  the  following  chapters  place  this  conclusion 
beyond  all  controversy. 

In  conclusion,  then,  we  may  summarize  that  por- 
tion of  our  public  law  which  relates  to  the  repudi- 
ation of  debts  as  follows  :  — 

1.  States  are  forbidden  by  the  Constitution  of 
the  United  States,  and  in  many  cases  by  their  own 

1  Art.  viii.  Sec.  4. 


30  BEPUBIATION  OF  STATE  DEBTS. 

constitutions,  to  violate  contracts  into  which  they 
have  entered. 

2.  The  United  States  Constitution  as  originally 
adopted  permitted  individuals  to  bring  suit  in  the 
federal  courts  against  States  guilty  of  having  vio- 
lated their  contracts,  and  in  so  far  afforded  them  a 
remedy;  but  the  eleventh  amendment  deprived 
persons  of  this  privilege,  and  virtually  took  away 
this  remedy.  At  the  present  time  the  federal 
government  can  afford  relief  to  a  defrauded  State 
creditor  only  indirectly  and  under  special  circum- 
stances. The  Supreme  Court  still  claims  the  right 
to  entertain  suits  brought  by  States  against  per- 
sons, and  it  still  persists  in  the  right  to  decide 
concerning  the  constitutionality  of  State  laws 
which  are  involved  in  cases  coming  within  its  ju- 
risdiction. It  can,  therefore,  protect  'a  person 
against  whom  a  State  is  attempting  to  enforce  an 
unconstitutional  law,  and  it  can  protect  a  person 
in  his  right  to  bring  suit  against  State  officials  who 
attempt  to  enforce  unconstitutional  laws. 

3.  Our  States,  with  four  or  five  exceptions, 
have  failed  to  provide  remedies  against  themselves 
in  cases  of  repudiation. 

4.  The  general  conclusion  is  that  our  States  are 
practically  free  to  pay  their  debts  or  to  repudiate 
them  as  they  see  fit. 

The  following  chapters  will  indicate  the  use 
which  they  have  made  of  this  freedom. 


II, 


REPUDIATION    IN    MISSISSIPPI, 
FLORIDA,   AND  ALABAMA. 


CHAPTER   II. 

BEPUDIATION  IN  MISSISSIPPI,   FLORIDA,   AND 
ALABAMA. 

Mississippi. 

Of  the  States  considered  in  this  sketch,  Missis- 
sippi was  the  first  to  practise  repudiation.  As 
early  as  the  forties  she  refused  to  pay  one  class  of 
bonds  aggregating  in  face  value  15,000,000,  and  in 
the  fifties  another  class  aggregating  $2,000,000 
met  a  like  fate. 

The  first  mentioned  bonds  were  issued  in  June, 
1838,  in  payment  of  five  thousand  shares  of  stock 
in  the  Union  Bank  of  Mississippi.  This  bank  was 
chartered  on  the  5th  of  February,  1838,  under  a 
law  which  pledged  the  State  to  the  issue  of  bonds 
to  the  amount  of  $15,500,000,  for  the  purpose  of 
supplying  the  working  capital.  Several  conditions 
were  attached  to  this  issue,  among  which  the  most 
important  are  the  following:  (1)  that  subscrij)- 
tion  books  for  the  whole  amount  ($15,500,000) 
should  be  opened ;  (2)  that  only  real  estate  own- 
ers in  the  State  of  Mississippi  should  be  permitted 
to  subscribe  ;  (3)  that  said  subscribers  should  give 
first-class  mortgage  securities,  which  were  to  be 
turned  over  by  the  bank  officials  to  the  State  as 

33 


34  REPUDIATION  OF  STATE  DEBTS 

security  for  the  bonds  ;  (4)  that  the  bonds  should 
not  be.  sold  below  par.^  The  validity  of  the  char- 
ter which  prescribed  these  conditions  rested  upon 
the  compliance  of  the  legislature  with  the  follow- 
ing provisions  of  the  constitution  designed  to  pre- 
vent hasty  and  unpopular  legislation  :  "  No  law 
shall  ever  be  passed  to  raise  a  loan  of  money  on 
the  credit  of  the  State,  or  to  pledge  the  faith  of  the 
State  for  the  payment  or  redemption  of  any  loan 
or  debt,  unless  such  law  be  proposed  in  the  Senate 
or  House  of  Representatives,  and  be  agreed  to  by 
a  majority  of  the  members  of  each  house,  and  en- 
tered on  their  journals  with  the  yeas  and  nays 
taken  thereon,  and  be  referred  to  the  next  succeed- 
ing legislature,  and  published  three  months  previ- 
ous to  the  next  regular  election  in  three  newspapers 
of  the  State ;  and  unless  a  majority  of  each  branch 
of  the  legislature  so  elected,  after  such  election, 
shall  agree  to  and  pass  such  law."  ^ 

Ten  days  after  this  enactment  a  bill  was  passed 
entitled  "  An  act  supplementary  to  an  act  to  in- 
corporate the  subscribers  to  the  Mississippi  Union 
Bank,"  which  contained  the  following  provision : 
"  As  soon  as  the  books  of  subscription  for  stock  in 
the  said  Mississippi  Union  Bank  are  opened,  the 
Governor  of  this  State  is  hereby  authorized  and 
required  to  subscribe  for,  in  behalf  of  this  State, 
fifty  thousand  shares  of  the  stock  of  the  original 

1  For  the  charter,  see  Laws  of  Mississippi  for  1838,  p.  9. 

2  See  Art.  VII.  Sec.  9  of  the  constitution  of  1838. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    35 

capital  of  the  said  bank ;  the  same  to  be  paid  for 
out  of  the  proceeds  of  the  State  bonds,  to  be  exe- 
cuted to  the  said  bank  as  already  provided  for  in 
the  said  charter."  ^  Under  this  supplemental  act, 
bonds  to  the  amount  of  §5,000,000  were  executed 
to  the  bank  in  purchase  of  stock.  They  were  sold 
to  Mr.  Nicholas  Biddle,  an  agent  of  the  United 
States  Bank,  and  were  paid  for,  at  the  rate  of  4s. 
6d.  per  dollar,  in  five  equal  instalments  on  the 
first  day  of  November,  1838,  and  on  the  first  days 
of  January,  March,  May,  and  July,  1839.  Of  these 
bonds  1,543  were  afterwards  deposited  by  the 
Bank  of  the  United  States  as  security  for  loans  to 
it  in  Europe,  and  some  of  them  fell  into  the  hands 
of  Hope  &  Co.  of  Amsterdam. 

With  the  proceeds  of  this  sale  the  bank  com- 
menced business.^  Circumstances  were  unfavor- 
able to  it  from  the  beginning.  President  Jackson's 
specie  circular  and  the  war  on  the  United  States 
Bank  had  already  brought  the  people  of  the  State 
into  financial  straits.  There  was  need  of  more 
money;  and  the  proper  way  to  obtain  it,  according 
to  the  notions  of  the  time,  was  to  charter  ncAV 
banks.  Demands  for  chartei-s,  therefore,  came  to 
the  legislature  thick  and  fast,  and  for  a  time  they 
were  granted  without  hesitation,  as  the  following 
table  shows  :  — 

1  For  the  supplemental  act,  see  Laws  of  Mississippi  for  1838, 
p.  33;  also  Appendix  III. 

2  The  charter  authorized  the  opening  of  the  bank  as  soon  as 
$500,000  were  paid  in  on  the  stock. 


36  EEPUDIATION  OF  STATE  DEBTS 

Bank  capital  authorized  in  1833  .  .  $  6,000,000  i 

"         "            "             "  1836  .  .  21,000,000 

"        '*            "              "  1837  .  .  10,300,000 

"         "            "              "  1838  .  .  15,500,000 

No  one  at  first  seemed  to  appreciate  the  danger 
of  this  policy,  notwithstanding  the  fact  that  nu- 
merous bank  failures  in  New  England,  New  York, 
and  the  greater  part  of  the  South  and  West  pointed 
clearly  to  it.  The  Governor,  however,  did  finally 
conclude  that  the  State  was  suffering  from  an  over- 
issue of  bank  notes,  and  vetoed  thereafter  the 
charters  granted  by  the  legislature.  Unfortunatel}^ 
he  began  to  veto  just  after  he  had  approved  the 
charter  for  the  Union  Bank  and  the  act  supple- 
mental to  it.2 

Having  thus  commenced  its  existence  under  the 
most  unfavorable  circumstances,  the  bank  should 
have  been  managed  with  great  discretion  and  con- 
servatism. But,  on  the  contrary,  its  capital  w\as 
loaned  to  insolvent  individuals  and  corporations, 
and  its  management  resembled  that  of  a  gambling 
concern .3  In  less  than  two  years  after  the  grant- 
ing of  its  charter  it  was  hopelessly  insolvent.* 

In  January,  1841,  the  Governor  communicated 
to  the  legislature  the  facts  concerning  the  bank's 

1  Bankers'  Magazine,  Nov.  1849,  p.  341. 

2  See  "  Nine  Years  of  Democratic  Rule  in  Mississippi,"  p.  19. 

8  See  "  The  Origin  of  Repudiation,"  Bankers'  Magazine,  De- 
cember, 1846. 

*  "Report  of  Bank  Commission  to  the  legislature  of  the  State 
of  Mississippi,  declared  Jan.  4, 1840. 


r- 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    37 

condition,  and  recommended  that  it  be  placed  in 
liquidation,  and  that  the  five  millions  of  bonds 
negotiated  in  1838  be  repudiated.  He  claimed 
that  these  bonds  were  illegal,  and  that  fraud  had 
been  perpetrated  in  their  issue/  In  a  letter  to 
Hope  &  Co.  of  Amsterdam,  who  demanded  pay- 
ment of  overdue  interest,  he  again  insisted  upon 
repudiation.^  The  legislature  of  1841  protested  in 
vigorous  terms  against  this  recommendation,  but 
the  people  showed  their  approval  by  sending  to  the 
capital  in  1842  a  legislature  which  denied  that  the 
State  was  under  legal  or  moral  obligations  to  pay 
the  bonds  in  question. 

The  chief  argument  used  by  the  repudiationists 
was  the  unconstitutionality  of  the  supplemental 
act  under  which  these  bonds  were  issued.^  This 
act,  it  was  claimed,  was  something  more  than  an 
amendment  to  the  original  charter,  and,  according 
to  the  constitutional  provision  already  quoted, 
should  have  received  the  sanction  of  two  legisla- 
tures. The  argument  was  based  upon  the  fact 
that  the  supplemental  act  ordered  the  sale  of 
bonds  in  payment  of  stock  in  the  Union  Bank, 
while  the  original  act,  which  was  passed  in  a  con- 

^  See  article  on  "  The  Origin  of  Repudiation  "  in  the  Bankers' 
Magazine  for  December,  184G. 

2  The  letter  mentioned  is  quoted  in  the  Bankers'  Magazine  for 
November,  1849,  in  an  article  entitled  **  Repudiation." 

3  For  an  able  presentation  of  this  argument,  see  Jefferson 
Davis's  letter  in  reply  to  an  attack  of  the  London  Times,  quoted  in 
the  Bankers'  Magazine  for  November,  18i9,  p.  363. 


38  REPUDIATION  OF  STATE  DEBTS 

stitutional  manner,  authorized  no  snch  purchase, 
but  simply  the  issue  of  bonds  under  certain 
definite  conditions,  none  of  which  had  been  com- 
plied with  in  the  issue  of  the  five  millions. 

Another  illegal  proceeding  was  the  sale  of  the 
bonds  on  credit,  whereas  the  original  act  forbade 
a  sale  below  par.  It  was  claimed  that  a  sale  on 
credit  practically  amounted  to  a  sale  below  par, 
interest  being  paid  on  the  whole  amount  from  the 
beginning.  It  was  further  claimed  that  the  State 
suffered  loss  from  the  change  in  the  stipulations 
from  dollars  and  cents  to  pounds,  shillings,  and 
pence. 

Honest  differences  of  opinion  have  been  ex- 
pressed concerning  the  validity  of  these  arguments, 
and  especially  concerning  the  alleged  unconstitu- 
tionality of  the  supplemental  act.  That  the  rep- 
resentatives of  the  people,  however,  then  and  for  a 
long  time  after,  saw  nothing  wrong  in  this  act  and 
the  operations  of  the  Governor  and  bank  officers  in 
the  negotiation  of  the  bonds  is  evident  from  the 
following  facts.  The  first  legislature  which  met 
after  the  sale  of  the  bonds  passed  the  following 
resolution :  "  Resolved  that  the  sale  of  the  bonds 
was  highly  advantageous  to  the  State  and  the 
bank,  and,  in  accordance  with  the  injunctions  of 
the  charter,  .  .  .  bringing  timely  aid  to  an  embar- 
rassed community."  The  next  legislature  (1840) 
uttered  no  protest  against  the  bonds,  though  it 
legislated  concerning  the  bank.     The  acquiescence 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    39 

of  two  successive  legislative  bodies  should  —  in 
equity,  at  least,  if  not  in  law  —  be  interpreted  as 
giving  validity  to  the  act  under  which  the  bonds 
were  issued,  as  well  as  to  the  manner  of  their 
issue. 

This  view  of  the  case  certainly  becomes  tenable 
when  we  review  the  decisions  of  Mississippi's  own 
courts.  The  State  Constitution  at  the  time  of  the 
issue  of  these  bonds  permitted  suit  to  be  brought 
against  the  State  in  the  Court  of  the  Chancellor, 
and,  on  appeal,  in  the  High  Court  of  Errors  or 
Appeals.  The  holders  of  repudiated  bonds  availed 
themselves  of  this  constitutional  privilege,  and 
both  courts  decided  that  the  State  was  legally  and 
morally  bound  for  the  payment  of  the  bonds. 

In  the  case  of  Campbell  v.  Mississippi  Union 
Bank  (6  H.  625)  the  court  made  the  following 
statement  concerning  the  supplemental  act  claimed 
to  be  unconstitutional :  "  The  supplemental  act 
makes  no  alteration  whatever  in  regard  to  this 
section  (Sec.  5  of  the  original  act  which  pledged 
the  faith  of  the  State).  It  changes  in  some  re- 
spects the  mere  detail  of  the  original  charter  in 
the  mode  of  carrying  the  corporation  into  success- 
ful operation,  and  authorizes  the  Governor  to  sub- 
scribe for  the  stock  on  the  part  of  the  State.  The 
object  of  this  pledge  is  not  changed ;  on  the  con- 
trary, the  supplemental  act  was  passed  in  aid  of 
the  original  design.  In  applying  the  constitu- 
tional test  to  the  fifth  section,  I  am  not  able  to 


40  REPUDIATION  OF  STATE  DEBTS 

perceive  any  reason  which  to  me  seems  sufficient 
to  justify  that  it  is  unconstitutional." 

In  the  case  of  the  State  of  Mississippi  v.  Johnson 
(3  C,  p.  755)  the  court  says :  ^'From  the  view  we 
take  of  the  questions  connected  with  this  branch 
of  the  subject,  we  are  compelled  to  hold  that  the 
supplemental  act  was  not  void  in  consequence  of 
not  having  been  passed  in  conformity  with  the 
direction  contained  in  the  ninth  section  of  the 
seventh  article  of  the  constitution." 

Further  on  (p.  762)  in  the  same  decision  the 
statement  is  made :  "  Having  examined  the  several 
grounds  on  which  it  was  alleged  that  the  supple- 
mental act  was  void,  we  have  come  to  the  con- 
clusion that  it  was  not  void,  but  hold  it  to  be  a 
valid  legislative  enactment." 

Regarding  the  claim  that  the  bonds  were  sold 
for  less  than  their  par  value  and  hence  were  uncon- 
stitutional, the  court  said:  "We  are  of  opinion 
that  it  does  not  appear  from  the  facts  of  the  case 
that  the  bonds  were  sold  for  less  than  their  par 
value;  consequently  that  the  sale  was  neither 
illegal  nor  void"  (p.  769). 

Before  recording  the  last  act  in  this  repudiation 
drama,  it  will  be  well  to  trace  the  history  of  the 
other  repudiated  bonds  to  which  reference  was 
made  above.  They  were  the  so-called  Planters' 
Bank  bonds.  This  institution  was  chartered  by 
the  State  in  1830  with  an  authorized  capital  of 
13,000,000,  of  which  $2,000,000  were  reserved  for 


IN  3IISS1SSIPPI,  FLORIDA,  AND  ALABAMA.    41 

the  State.  Bonds  to  the  amount  of  $500,000  were 
accordingly  issued  in  July,  1831,  and  the  remain- 
ing 11,500,000  in  March,  1832.  These  bonds  were 
sold  in  the  Philadelphia  market  at  a  price  which 
yielded  the  State  a  premium  of  about  1250,000.^ 
This  sum  was  set  aside  as  a  sinking  fund,  into 
which  it  was  decided  to  turn  the  proceeds  of  the 
State's  share  of  the  bank  dividends. 

The  bank  flourished  well  up  to  1839.  In  the 
mean  time  it  had  established  branches  in  several 
cities  of  the  State ;  had  issued  a  large  circulation 
and  received  large  deposits  ;  and,  during  a  portion 
of  the  period,  had  paid  ten  per  cent  dividends. 
The  sinking  fund  in  1839  had  grown  to  1800,000. 
In  this  year,  however,  fortune  changed.  The 
period  of  the  bank's  prosperity  coincided  with  the 
period  of  inflation  which  has  been  described,  and 
when  the  bubble  of  bank  credit  burst  throughout 
the  State,  it  found  itself  unable  to  meet  its  obliga- 
tions. Unable  to  pay  interest  on  the  bonds,  the 
State  was  called  upon  to  meet  the  deficiency. 
This,  however,  she  failed  to  do.  No  one  at  this 
time  seriously  proposed  the  repudiation  of  the 
bonds,  but  the  State  was  delinquent  in  letting 
the  interest  go  by  default.  The  sinking  fund, 
on  account  of  bad  investments,  shrunk  rapidly, 
amounting  in  1840  to  1525,765  and  in  1848  to  no 
more  than  |100,000. 

1  See  article  on  "Banking  and  Repudiation  in  Mississippi  "  in 
Bankers'  Magazine  for  August,  1863. 


42  REPUDIATION  OF  STATE  DEBTS 

In  the  legislative  session  of  1848-49  the  sub- 
ject of  the  Planters'  Bank  bonds  and  the  overdue 
interest  on  them  was  agitated.  The  sentiment  in 
favor  of  paying  them  and  the  interest  due  so  far 
as  possible  prevailed,  and  a  law  was  passed  author- 
izing the  application  of  the  sinking  fund  to  this 
latter  purpose.  There  was  developed,  however, 
considerable  opposition  to  this  measure,  and  a 
desire  to  repudiate  the  bonds  manifested  itself  on 
all  sides.  The  State  Treasurer  refused  to  pay  the 
coupons  on  certain  bonds  which  were  presented, 
on  the  ground  that  those  coupons  were  first  to  be 
paid  which  were  cut  from  the  oldest  bonds,  or, 
rather,  that  the  interest  must  be  paid  on  the  oldest 
bonds  first.  A  suit  was  brought  for  a  mandamus 
compelling  him  to  make  the  payment,  and  thus  an 
opportunity  was  given  the  court  to  decide  the 
question  concerning  the  validity  of  these  bonds. 
It  is  a  noticeable  fact  that  no  one  connected  with 
this  suit  so  much  as  suggested  that  these  bonds 
were  in  any  respect  invalid.  It  was  taken  for 
granted  that  they  were  legal  and  constitutional, 
and  that  they  ought  to  be  paid.^ 

As  in  the  case  of  the  Union  Bank  bonds,  so  here 
the  opinion  of  the  courts  seemed  to  liave  very  little 
weight.  The  mania  of  repudiation  seemed  to  have 
infected  the  whole  people.  They  only  thought  of 
ridding  themselves  of  a  burden,  and  did  not  con- 
sider the  equities  of  the  case.     At  the  election  of 

1  See  Wilson  v.  GriflBth,  2  C,  p.  468. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    43 

1852  the  question  was  submitted  to  popular  vote 
whether  a  tax  should  be  levied  to  pay  the  interest 
on  the  Planters'  Bank  bonds,  and  a  majority  of 
4,000  against  the  levy  of  such  a  tax  was  returned. 
This  vote  undoubtedly  meant  that  the  people  were 
in  favor  of  the  repudiation  of  these  bonds,  and 
willing  legislatures  so  interpreted  it. 

The  fate  of  both  these  and  the  Union  Bank 
bonds  was  sealed  by  the  constitution  adopted  in 
1875,  which  contained  the  following  clause  :  "Nor 
shall  the  State  assume,  redeem,  secure,  or  pay  any 
indebtedness  claimed  to  be  due  by  the  State  of 
Mississippi  to  any  person,  association,  or  corporation 
whatsoever,  claiming  the  same  as  owners,  holders, 
or  assignees  of  any  bond  or  bonds  known  as  the 
Union  Bank  bonds  or  the  Planters'  Bank  bonds." 
Since  that  time  the  State  has  paid  no  heed  to  the 
cries  of  her  numerous  creditors,  or  to  the  reproaches 
of  her  sister  States,  or  to  Wall  Street's  opinion  of 
her  credit. 

Florida. 

Florida,  unlike  her  sister  States  in  the  South, 
has  had  two  attacks  of  the  disease  of  repudiation. 
During  the  first  one  she  disposed  of  $3,900,000  of 
bonds  issued  or  indorsed  for  banks,  and  during 
the  second  of  $4,000,000  of  railroad  aid  bonds. 

The  story  of  the  bank  bonds  is  long  and  inter- 
esting, but  for  present  purposes  it  may  be  briefly 


44  REPUDIATION  OF  STATE  DEBTS 

told.  In  1833  the  territory  chartered  the  Union 
Bank  of  Florida  with  an  authorized  capital  of 
$3,000,000,  which  sum  was  raised,  as  authorized 
by  the  charter,  by  a  sale  of  territorial  bonds. 
Lands  and  slaves  of  stockholders  were  hypothe- 
cated to  the  territory  as  security.  The  charter 
prescribed  that  the  bonds  must  not  be  sold  below 
par;  that  the  property  to  be  hypothecated  as  se- 
curity should  be  appraised  according  to  certain 
regulations;  and  that  a  portion  of  the  profits  of 
the  bank  should  accrue  to  the  territory  in  consid- 
eration of  the  aid  received.^  The  stockholders 
were  not  obliged  to  pay  any  part  of  the  amount 
they  subscribed,  but  simply  to  secure  their  sub- 
scription by  bonds  or  mortgages.  The  bonds  were 
sold  mostly  in  Europe  in  1834,  1838,  and  1839, 
and  at  a  "  nominal "  discount  of  from  three  to  ten 
per  cent.^  The  directors  of  the  bank  interpreted 
the  charter  to  mean  that  the  bonds  must  not  be 
sold  below  par  in  the  funds  of  Florida,  hence  eight 
or  ten  per  cent  discount  in  London  amounted  to  a 
considerable  premium  according  to  their  notion, 
and  the  discount  was  "  nominal "  rather  than  real. 
The  bank  began  business  on  the  16th  of  Janu- 
ary, 1835.  Most  of  its  stock  was  owned  by  a 
comparatively  few  persons,  to  whom  was  loaned 

1  See  Laws  of  Florida  for  1833. 

2  See  letter  of  the  bank  president  to  the  Chairman  of  the 
Committee  on  Banks  appointed  in  1840. —Ex.  Doc.  No.  Ill,  2d 
Session  of  Twenty-sixth  Congress,  vol.  iv.  p.  298. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    45 

the  greater  part  of  its  capital.  The  security  was 
the  stock  held,  which,  however,  had  not  been  paid 
for,  but  which  was  secured  by  lands  and  slaves, 
purchased  with  the  proceeds  of  the  loans.^  The 
interest  on  the  bonds  sold  in  1834  was  paid  by  the 
negotiation  of  new  bonds,  and  the  bank  was  able 
to  continue  this  process  until  all  the  bonds  author- 
ized to  be  issued  had  been  disposed  of.  The  bank 
was  also  guilty  of  overtrading  and  of  issuing  an 
excessive  amount  of  circulating  notes. 

May  10,  1837,  the  bank  suspended  specie  pay- 
ments, and  grave  fears  concerning  its  solvency 
were  felt.  It  was  unable  to  resume  payment  of 
specie  in  1839  and  1^40,  when  most  solvent  banks 
of  other  States  resumed,  and,  indeed,  it  never 
again  became  a  specie-paying  bank.  In  1842  it 
failed  to  pay  the  interest  on  the  bonds  loaned  it, 
and  the  question  of  the  territory's  liability  — 
which  had  been  under  discussion  for  two  or  three 
years  at  least  —  became  a  live  issue. 

In  1840  the  Judiciary  Committee  of  the  terri- 
torial legislature,  to  which  was  referred  the  ques- 
tion of  the  right  of  the  territory  to  pledge  the 
faith  of  the  people  in  aid  of  corporations,  expressed 
an  adverse  opinion  in  the  following  resolutions  :  — 

1.  Resolved^  That  the  power  of  the  Governor 
and  Legislative  Council  of  the  Territory  of  Flor- 

1  See  Report  of  Commission  on  Banks  appointed  by  territorial 
legislature  of  1840.  —  Ex.  Doc.  No.  Ill,  2d  Session  of  Twenty- 
sixth  Congress  p.  278. 


46  BEPUBIATION  OF  STATE  DEBTS 

ida,  delegated  by  Congress  over  "  all  rightful 
subjects  of  legislation,"  under  that  clause  in  the 
Constitution  which  invests  Congress  with  authority 
"  to  make  all  needful  rules  and  regulations  respect- 
ing the  territory  and  other  property  belonging  to 
the  United  States,"  does  not  extend  to  the  creation 
of  banks  with  exclusive  privileges  and  franchises, 
nor  to  the  issuing  of  bonds  and  guarantees  in  aid 
of  such  institutions,  pledging  the  faith  and  credit 
of  the  people  of  Florida. 

2.  Resolved^  That  such  pledge  of  the  faith  and 
credit  of  the  people  of  Florida  is  null  and  void.^ 

Though  the  opinions  of  eminent  lawyers  ^  were 
diametrically  opposed  to  the  '-sentiment  expressed 
in  these  resolutions,  subsequent  governors  ^  of  the 
Territory  encouraged  the  people  in  the  welcome  be- 
lief that  the  bonds  issued  in  aid  of  banks  were 
null  and  void  on  account  of  their  illegality.  At 
the  time  the  Union  Bank  defaulted,  and  subse- 
quently Governor  Call  *  —  who  was  an  exception  to 
the  rule  —  opposed  the  plan  of  repudiation,  but 
claimed  that  the  Territory  was  not  liable  until  all 
the  resources  of  the  bank  were  exhausted.  Un- 
fortunately, the  people  as  represented  in  the  Legis- 

1  Ex.  Doc.  2d  Session  of  Twentieth  Congress,  vol.  iv.  p.  2G9. 

2  See  in  the  above-mentioned  document  the  opinions  of  James 
Kent,  Horace  Binney,  Peter  A.  Jay,  and  Daniel  Webster. 

3  See  message  of  Governor  Branch  dated  Jan.  10,  1845,  and  the 
message  of  Governor  Reid  dated  Jan.  11,  184C.  —  Ex.  Doc.  1st  Ses- 
sion Twenty-ninth  Congress,  pp.  G8o  and  779  respectively. 

4  See  quotations  from  his  message  contained  in  the  above-men- 
tioned document. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    47 

lative  Council  did  not  agree  with  him  when  the 
time  came  for  the  Territory  to  shoulder  her  obliga- 
tions, and  the  outcome  was  that  Florida  entered 
the  Union  as  a  State  adhering  to  the  doctrine  that 
her  new  form  of  political  life  released  her  from 
these  obligations. 

This  statement  applies  to  the  other  obligations 
of  the  Territory  in  behalf  of  banks,  amounting  in 
all  to  1900,000,  as  well  as  to  the  bonds  of  the  Union 
Bank,  and  it  is  only  necessary  to  state  briefly  the 
nature  of  these  obligations. 

The  Bank  of  Pensacola  was  chartered  in  1831 
with  an  authorized  capital  of  $200,000,  and  began 
business  Nov.  28,  1833.  Early  in  1835  it  was 
authorized  by  act  of  the  Legislative  Council  to  in- 
crease its  capital  to  $2,500,000,  and  to  purchase 
stock  in  the  Alabama,  Florida,  and  Georgia  Rail- 
road. To  aid  in  this  purchase  the  bank  was  further 
authorized  to  issue  its  bonds  to  the  amount  of 
$500,000,  and  the  Governor  was  authorized  to 
indorse  them  in  behalf  of  the  Territory.  The 
bank  executed  the  provisions  of  this  act,  and  the 
bonds  were  duly  issued  and  indorsed,  and  the  rail- 
road stock  purchased.  The  Territory  received  as 
security  a  mortgage  on  the  capital  stock  of  the 
bank,  including  the  railroad  shares. 

The  life  of  this  institution  was  very  short.  By 
1843  it  had  passed  out  of  existence.  The  causes 
of  its  early  demise  were  many ;  but  chief  among 
them  was  the  investment  of  too  much  money  in 


48  REPUDIATION  OF  STATE  DEBTS 

the  Alabama,  Florida,  and  Georgia  Railroad.  This 
road  failed,  and  the  mortgage  held  by  the  Territory 
proved  worthless.  The  only  alternative  left  being 
repudiation  or  payment  of  the  bonds  by  taxation, 
the  former  was  adopted  for  the  reasons  mentioned 
above. 

The  Southern  Life  Insurance  and  Trust  Com- 
pany was  incorporated  Feb.  14,  1835.  Its  char- 
ter granted,  among  other  powers,  the  right  to 
insure  life ;  to  receive  moneys  in  trust  at  such 
rates  of  interest  as  could  be  obtained,  not  exceed- 
ing eight  per  cent  per  annum;  and  to  buy,  dis- 
count, and  sell  drafts,  promissory  notes,  and  bills  of 
exchange.  Its  capital  stock  was  fixed  at  12,000,000, 
with  the  privilege  of  increasing  it  to  $4,000,000. 
The  company  was  authorized  to  issue  bills  or  notes, 
other  than  drafts  or  bills  of  exchange,  to  the 
amount  of  capital  actually  paid  in,  and,  in  addition^ 
certificates  of  one  thousand  dollars  each,  bearing 
not  more  than  six  per  cent  interest,  for  the  pay- 
ment of  which  the  faith  of  the  Territory  was  to  be 
pledged  by  the  indorsement  of  the  Governor.  As 
security  the  charter  provided  :  "  That  in  case  the 
said  company  shall  make  defaults  in  payment  of 
the  principal  or  interest  of  such  certificates,  it  shall 
be  the  duty  of  the  Court  of  Appeals  of  said  Terri- 
tory, on  being  certified  of  the  fact  by  the  Govern- 
or, to  issue  an  appropriate  process  to  the  marshal, 
commanding  him  to  take  so  much  of  the  money, 
choses  in  action,  or  other  effects  or  property  of  said 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    49 

company,  and  bring  the  same  into  court  forthwith 
as  will  be  sufficient  to  indemnify  the  government 
from  loss  by  reason  of  such  default,  and  the  court 
is  hereby  empowered  to  direct  the  sale  of  the 
same.'*  ^ 

The  company  commenced  operations  in  the 
same  year  that  it  was  chartered,  before  the  act  of 
incorporation  had  been  approved  by  Congress.  The 
Senate  Committee  on  Finance,  of  which  Daniel 
Webster  was  chairman,  made  a  report  ^  in  June, 
1836,  which  strongly  disapproved  the  act,  but  rec- 
ommended the  amendment  of  the  charter  in  vicAV 
of  the  fact  that  the  company  had  already  com- 
menced operations.  Amendments  were  made  in 
February,  1837,  and  February,  1838,  but  they  in- 
creased rather  than  limited  the  powers  already 
granted. 

The  certificates  issued  and  guaranteed  aggre- 
gated i400,000  at  the  time  the  Territory  was  called 
upon  to  meet  the  obligations  incurred  in  behalf  of 
this  company.  The  property  she  was  authorized 
to  seize  and  sell  had  no  existence,  and  she  would  of 
necessity  have  lost  the  face  value  of  the  certificates 
had  she  not  taken  refuge  behind  the  claim  that  as 
a  State  she  was  not  responsible  for  the  debts  con- 
tracted in  behalf  of  banks  and  other  corporations 
during  her  Territorial  life. 

1  Ex.  Doc.  No.  226,  1st  Session  Twenty-ninth  Congress,  vol.  viii. 
p.  746. 
*  Sen.  Doc.  No.  409,  1st  Session  Twenty-fourth  Congress,  vol.  vi. 


50  REPUDIATION  OF  STATE  DEBTS 

The  reasons  assigned  for  the  repudiation  of  the 
obligations  already  described  are  entirely  fanciful, 
and  furnish  grounds  for  the  claim  that  the  Terri- 
torial authorities  were  hard  pressed  to  assign  a 
rational  cause  for  their  action.  A  very  real  and 
much  better  reason  for  repudiation  could  have  been 
assigned,  and  indeed  was  given  by  the  representa- 
tives of  the  Territory,  in  their  debates  upon  the 
question  in  the  session  of  1841.  About  1840  the 
population  of  Florida  was  estimated  at  about  fifty 
thousand  souls.  Hence  the  debt  which  the  failure 
of  these  banks  brought  upon  her  amounted  to  over 
fifty  dollars  per  capita,  and  the  further  issues 
which  were  demanded  by  the  acts  chartering  the 
banks  would  have  brought  the  debt  to  about  two 
hundred  dollars  per  capita.^  There  was  very  little 
wealth  in  the  Territory  at  the  time,  and  it  would 
have  been  impossible  to  pay  the  interest  on  such  a 
debt  and  to  meet  the  current  expenses  of  the  Ter- 
ritorial government.  It  is  difficult  to  see,  there- 
fore, how  the  holders  of  these  bonds  could  have 
obtained  either  principal  or  interest.  It  is  possible 
that  in  more  prosperous  days  the  State  might  have 
paid  her  old  debts ;  but,  in  the  light  of  her  subse- 
quent financial  history,  we  must  acknowledge  that 
this  possibility  was  very  remote. 

The  constitution  under  which  Florida  entered 
the  Union  as  a  State  made  it  "  the  duty  of  the 
General  Assembly  as  soon  as  practicable  to  ascer- 

1  See  Tenth  Census,  vol.  vii.  p.  687. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    51 

tain  by  law  proper  objects  of  im])rovement  in  rela- 
tion to  roads,  canals,  and  navigable  streams,  and 
to  provide  for  a  suitable  application  of  such  funds 
as  may  be  appropriated  for  such  improvements."  ^ 
In  order  to  carry  out  what  Avere  understood  to  be 
the  provisions  of  this  clause,  an  act  was  passed  in 
January,  1855,  providing  for  the  encouragement 
of  a  liberal  system  of  internal  improvements,  and 
authorizing  the  issue  of  State  bonds  to  the  amount 
of  f  10,000  per  mile  in  aid  of  railroads.  The  act 
provided  that  such  bonds  should  constitute  a  first 
mortgage  lien  on  the  roads,  their  equipments  and 
fiancliises.  It  was  subsequently  amended  so  as  to 
permit  the  issue  of  bonds  to  the  amount  of  116,000 
per  mile,  and  to  permit  the  Governor,  in  case  a 
company  defaulted  in  the  payment  of  either  prin- 
cipal or  interest,  or  any  part  thereof,  after  twelve 
months  to  enter  upon  and  take  possession  of  the 
road  and  its  franchises,  and  to  sell  them  at  public 
auction.  Under  authority  of  these  acts  bonds 
to  the  amount  of  $4,000,000  were  issued  in  aid 
of  the  Jacksonville,  Pensacola,  and  Mobile  Rail- 
road and  the  Florida  Central,  bonds  of  these 
roads  of  an  equal  amount  being  taken  in  ex- 
change. 

Early  in  the  seventies  these  roads  defaulted  in 
their  interest  payments,  and  the  State  Avas  called 
upon  to  make  good  the  deficiency.  This  she  was 
utterly  unable  to  do.     Her  income  had  been  for 

1  Art.  XI.  Sec.  2. 


52 


REPUDIATION  OF  STATE  DEBTS 


many  years  considerably  less  than  her  expenses.^ 
From  1846  to  1856  her  finance  reports  show  an 
average  annual  deficit  of  about  nine  thousand 
dollars.  Bonds  were  issued  from  time  to  time  for 
the  purpose  of  retiring  her  floating  debt,  and  the 
accumulating  interest  on  these  made  the  deficits 
larger  after  the  war.  The  financial  report  for  the 
year  ending  Dec.  31,  1873,  states  that  the  total 
receipts  for  that  year  were  $257,233.54,  while  the 
warrants  issued  during  the  same  period  amounted 
to  1304,214.35.  A  floating  debt  amounting  to 
1224,827.67  existed  at  the  same  time.^ 

As  authorized  by  law,  the  State  took  possession 
of  the  defaulting  roads,  but  was  prevented  for  a 
long  time  from  selling  them  by  litigation  in  the 
courts.  The  case  of  the  State  was  complicated  by 
the  fact  that  the  Western  North  Carolina  Railroad 


1  The  following  table,  taken  from  the  Tenth  Census,  vol.  vii. 
p.  588,  shows  the  amount  of  the  deficit  for  the  years  named  :  — 


1846. 

revenue 

collected 

,  $27,597.28,  warr 

ants  issued 

,  $56,009.57 

1847 

45,357.60 

52,787.46 

1848 

56,832.72 

54,913.81 

1849 

58,638.11 

55,807.79 

1850 

46,079.84 

38,559.33 

1851 

57,141.10 

67,187.73 

1852 

55,619.63 

55,234.49 

1853 

57,278.36 

108,607.88 

1854 

62,801.51 

53.417.13 

1855 

68,365.19 

85,365.19 

$535,711.34 

$627,890.58 

3  See  Financial  Chronicle  for  Feb.  8,  18 

73. 

IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    53 

had  acquired  a  first  mortgage  lien  on  the  Florida 
Central,  and  naturally  objected  to  its  being  sold 
for  the  benefit  of  the  State.  During  the  progress 
of  this  litigation,  cases  were  brought  before  the 
courts  involving  the  validity  of  the  railroad  aid 
bonds,  and  the  State  was  relieved  of  her  anxiety 
and  care  in  the  matter  by  a  decision  to  the  effect 
that  the  bonds  were  unconstitutional. 

The  court  claimed  that  the  constitution  did  not 
authorize  the  exchange  of  the  bonds  of  the  State 
for  those  of  railroad  companies,  but  simply  the 
issue  of  bonds  for  the  construction  of  public  works 
which  should  be  her  own  property.  The  follow- 
ing are  the  words  of  the  court  in  the  case  of  Hol- 
land V.  the  State  of  Florida  and  others  :  "  Where 
in  the  constitution  can  authority  be  found  that 
will  authorize  the  State  bonds  to  be  issued  to  be 
exchanged  for  railroad  bonds  ?  This  sivapping  of 
State  obligations  for  railroad  paper  at  the  will 
of  the  legislature,  ad  libitum^  is  certainly  a  new  idea 
begotten  by  those  who  believe  that  the  legislature 
is  the  dispenser  of  all  power,  and  that  it  only 
requires  a  sufiicient  number  of  legislative  votes  to 
do  anything.  But  this  court  will  guard  the  con- 
stitution from  such  pernicious  construction."  ^ 

After  the  rendition  of  this  decision  the  State  no 
longer  troubled  herself  about  the  railroad  aid  bonds, 
and  subsequently  omitted  to  mention  them  as 
among  her  liabilities. 

1  15  Florida,  491. 


54  REPUDIATION  OF  STATE  DEBTS 

Adding  the  14,000,000  of  bonds  with  accrued 
interest  thus  disposed  of  to  the  13,900,000  of  bank 
bonds  before  mentioned,  makes  the  aggregate  of 
Florida's  repudiation  amount  to  something  oyer 
eight  million  dollars. 

Alabama. 

The  first  constitution  of  Alabama,  adopted  July 
5,  1819,  authorized  the  establishment  of  a  State 
bank  with  as  many  branches  as  the  legislature 
might  deem  proper.  It  also  provided  that  at  least 
two-fifths  of  the  stock  in  these  banks  should  be 
reserved  for  the  State,  and  prescribed  a  number  of 
other  rules  to  which  the  banks  were  to  be  subject. 
Under  the  authority  granted  in  this  article  of  the 
constitution,  the  legislature  established  a  central 
bank  with  several  branches,  and  laid  the  foundation 
of  the  State  debt.  In  pursuance  of  a  series  of  acts 
dating  from  1823  to  1826  the  State  became  pos- 
sessed of  bank  stock  to  the  amount  of  #8,000,000. 
A  portion  of  this  went  to  the  State  school  fund 
and  to  the  trustees  of  the  University  of  Alabama 
as  compensation  for  the  lands  granted  to  these 
respectively  by  the  federal  government. 

These  banks  prospered  greatly  during  their  early 
history.  The  greater  part  of  the  expenses  of  the 
State  was  paid  by  the  earnings  of  her  stock,  most 
of  her  direct  taxes  being  abolished  in  1836.  But 
during  the  financial  convulsion  of  1837  they  became 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    55 

involved  in  financial  difficulties,  and  suspended 
specie  payments.  A  special  session  of  the  legis- 
lature was  called  to  afford  relief,  and,  among  other 
measures,  an  act  was  passed  making  the  bills  of  the 
bank  receivable  for  dues  of  the  State.  Prosperity 
did  not  come  with  these  measures  of  relief,  however, 
but,  instead,  the  condition  of  the  banks  became 
worse  with  each  year,  until  in  1842  they  were 
placed  in  liquidation.  The  State  was  responsible 
for  their  bills  and  most  of  their  obligations,  and 
the  settlement  left  her  with  a  considerable  debt,  the 
interest  and  principal  of  which,  however,  she 
proved  herself  entirely  able  to  pay  by  resorting  to 
heavy  taxation.  She  met  her  interest  charge  reg- 
ularly each  year  before  the  war,  and  paid  princi- 
pal enough  to  reduce  the  debt  in  1861  to  8  3,445,- 
000.1  During  the  war  she  paid  that  portion  of 
the  interest  which  was  due  on  the  bonds  held  in 
London,  but  paid  no  interest  in  New  York  after 
January,  1861.^ 

When  the  war  closed  the  State,  of  course,  was 
in  a  prostrate  condition,  financially  as  well  as  oth- 
erwise exhausted  by  the  struggle  through  which 
she  had  passed,  and,  owing  to  defective  revenue 
laws,  her  ordinary  sources  of  income  produced  very 
little.  In  1866  her  receipts  were  only  162,967.80, 
while  her  necessary  disbursements  were  $606,494.39. 

1  See  Tenth  Census,  vol.  vii.  p.  592. 

2  Of  the  total  debt  of  $3,445,000,  $1,336,000  were  held  in  Lon- 
don, and  $2,109,000  in  New  York.  Interest  on  the  London  portion 
was  paid  regularly  up  to  January,  1865. 


66  BEPUDIATION  OF  STATE  DEBTS 

In  1867  her  income  increased  to  1691,048.86,  and 
her  disbursements  to  $819,434.85.  In  1868  and, 
indeed,  in  nearly  every  subsequent  year  until  1876, 
there  was  a  large  balance  against  her.^ 

In  order  to  meet  necessary  expenses,  the  legisla- 
ture of  1865  passed  an  act^  on  Dec.  15  which 
authorized  the  issue  of  bonds  to  the  amount  of 
$1,500,000  to  mature  in  twenty  years,  and  to 
bear  interest  at  eight  per  cent  if  they  were  dollar 
bonds,  and  at  six  per  cent  if  they  were  sterling 
bonds.  A  sufficient  amount  of  these  was  issued 
before  November,  1866,  to  bring  the  debt,  exclu- 
sive of  the  educational  and  university  funds,  up  to 
$4,550,062.22.3  Other  bonds  and'  certificates  of 
indebtedness  were  subsequently  issued  to  meet  the 
deficits,  thus  bringing  this  portion  of  the  State  debt, 
exclusive  of  the  educational  and  univei-sity  fund, 
to  $5,382,800  on  Sept.  30,  1870,  and  to  $6,543,800 
on  Sept.  30,  1871.*  It  was  increased  still  more 
under  authority  of  acts  passed  Dec.  31,  1872,  Feb. 
25, 1873,  and  Dec.  19,  1873. 

The  most  troublesome  portion  of  the  debt  of  this 
State  was  founded  by  an  act^  passed  Feb.  19, 
1867,  which  authorized  the  indorsement  of  railroad 


1  See  Financial  Chronicle  for  March  11,  1871. 

2  See  Laws  of  Alabama  for  1865,  p.  40. 

3  Tenth  Census,  vol.  vii.  p.  592.    - 

*  See  the  State  Auditor's  Report  for  the  year  ending  Sept.  30, 
1871 ;  also  the  Financial  Chronicle  for  Nov.  30, 1867,  and  March  11, 
1871. 

«  See  Laws  of  Alabama,  18GG-G7  p.  686. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    57 

bonds  to  the  amount  of  112,000  per  mile.  One 
clause,  providing  that  this  indorsement  be  made 
for  each  section  of  twenty  miles  of  completed  road, 
was  amended  by  an  act^  passed  Aug.  7,  1868, 
which  permitted  the  indorsement  to  be  made  for 
each  five  miles  finished  after  twenty  miles  had  been 
constructed,  and  the  indorsement  to  be  raised  to 
$16,000  per  mile.  As  security  for  this  indorse- 
ment, the  State  was  to  be  given  a  first  mortgage 
on  the  roads ;  and  by  an  act  ^  approved  Feb. 
21,  1870,  the  Governor  was  authorized  to  take  pos- 
session of  any  road  in  case  it  defaulted  in  payment 
of  interest,  and  to  sell  it  for  the  benefit  of  the  State, 
if  its  earnings  were  not  sufficient  to  pay  the  accru- 
ing interest.  The  same  act  also  states  that  in  case 
of  a  default  in  the  payment  of  interest  by  any- 
road, "  the  Auditor  of  the  State  is  authorized,  and 
it  is  made  his  duty,  upon  his  warrant,  to  draw  from 
the  treasury  any  sum  of  money  necessary  to  pay 
the  interest  on  any  of  the  bonds  indorsed  by  the 
State,  whenever  said  interest  is  not  provided  for  by 
the  company ;  and  to  pay  such  interest  when  due 
as  provided  for  in  this  act ;  and,  in  case  the  exi- 
gency requires,  the  Governor  is  hereby  authorized 
and  directed  to  negotiate  temporary  loans  for  such 
purpose,  and  pledge  the  faith  of  the  State  for  the 
payment  of  the  same,  so  that  the  interest  upon  all 
the  indoi-sed  bonds  of  the  State  shall  be  promptly 
paid  when  due." 

1  See  Laws  of  Alabama,  1868,  p.  198. 

2  Ibid.,  1870,  p.  149. 


58  BEPUDIATION  OF  STATE  DEBTS 

The  railroad  companies  of  the  State  speedily 
took  advantage  of  these  acts.  Up  to  Nov.  15, 
1869,  12,600,000  of  railroad  bonds  had  been 
indorsed  ;  by  Sept.  30,  1870,  $8,480,000 ;  ^  and  by 
Sept.  30,  1873,  118,686,000.  In  addition  to  this, 
12,000,000  of  eight  per  cent  State  bonds  were  issued 
to  the  Alabama  and  Chattanooga  Railroad  under 
authority  of  an  act^  passed  Feb.  11,  1870,  and  later 
$300,000  of  State  bonds  were  issued  to  the  Mont- 
gomery and  Eufaula  Railroad  Company.  Of  all 
in  the  State,  the  former  company  was  the  most 
liberally  aided,  having  had  over  $5,000,000  of  its 
bonds  indorsed,  and  $2,000,000  of  State  bonds 
granted  to  it  directly. 

It  seems  that  with  ordinary  foresight  the  State 
officers  might  have  predicted  that  these  railroad 
companies  wotild  default  in  the  payment  of  in- 
terest on  these  indorsed  bonds.  Most  of  their 
roads  were  in  process  of  construction,  and  yielded 
no  revenue  ;  and  the  mere  fact  that  they  found  it 
necessary  to  call  upon  the  State  for  aid  was  in- 
dicative of  a  lack  of  funds.  It  might  also  have 
been  predicted  with  certainty  from  the  beginning 
that  the  payment  by  the  State  of  the  interest  on 
these  indorsed  bonds  would  reduce  her  to  bank- 
ruptcy. These  evils,  however,  were  either  not 
foreseen  or  not  heeded,  and  the  State  was  com- 
pelled  to   pass    through    the    humiliation   which 

1  See  Auditor's  Report  for  year  ending  Sept.  30,  1870. 

2  Laws  of  Alabama  for  1870,  p.  89. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    59 

inability  to  meet  obligations  brings.  The  Ala- 
bama and  Chattanooga  Railroad  Company  failed 
to  pay  the  interest  which  fell  due  Jan.  1,  1871,^ 
and  with  this  the  trouble  began.  The  State  took 
possession  of  the  road,  and  ultimately  sold  it,  after 
having  paid  out  nearly  a  million  dollars  in  interest 
on  its  bonds,  and  after  having  become  responsible 
for  the  payment  of  $312,000  in  receiver's  fees, 
and  il40,000  in  employees'  wages.  After  all  this 
she  was  still  liable  for  the  indorsed  and  direct 
bonds,  and  was  obliged  subsequently  to  com- 
promise them  all.  By  1873  the  other  subsidized 
railroad  companies  had  defaulted,  and  she  became 
responsible  for  the  interest  on  over  $18,000,000 
of  bonds  in  addition  to  the  burden  of  her  regular 
debt.  Of  course  she  was  obliged  to  suspend  the 
payment  of  interest,  and  her  debt  thus  increased 
with  frightful  rapidity  from  year  to  year. 

The  State  made  many  laudable  attempts  to 
meet  her  increasing  obligations,  and  to  provide 
for  the  payment  of  her  debts  in  full.  The  legisla- 
ture of  1872  passed  an  act  ^  establishing  a  sinking 
fund.  A  tax  of  one-twentieth  of  one  per  cent 
was  authorized  to  be  devoted  each  year  either  to 
the  purchase  of  State  bonds  or  of  railroad  bonds 
indorsed  by  the  State.  Early  in  1873  an  act^ 
was  passed  increasing  the  rate  of   taxation  fifty 

1  See  Financial  Chronicle  for  Jan.  7,  1871. 

2  Laws  of  Alabama  for  1871-72,  p.  13. 
s  IhuL,  1872-73,  p.  4. 


60  REPUDIATION  OF  STATE  DEBTS 

per  cent.  On  April  21  of  the  same  year  another 
act  was  passed  designed  to  reduce  very  materially 
the  debt  itself.  It  was  known  as  the  "  4,000  per 
mile  act,"  ^  and  provided  for  the  exchange  of  State 
indorsed  railroad  bonds  for  direct  bonds  of  the 
State,  bearing  interest  at  seven  per  cent  in  gold, 
and  redeemable  in  thirty  years,  the  rate  of  ex- 
change being  four  thousand  dollars  of  the  former 
for  one  thousand  dollars  of  the  latter.  The  act 
further  provided  that  for  the  first  five  j^ears  after 
the  issue  of  such  bonds,  the  company  to  whom 
they  were  issued  should  set  apart  three-fourths  of 
one  per  cent  of  its  gross  earnings  as  a  sinking- 
fund  for  their  redemption;  and  that  thereafter 
five  per  cent  of  their  gross  earnings  should  be  set 
aside  for  this  purpose.  This  act  was  by  no  means 
popular,  and  only  three  railroads  exchanged  bonds 
under  it,  but  by  so  doing  they  reduced  the  State's 
liabilities  $3,468,000.2 

For  the  final  settlement  of  the  difficulty,  how- 
ever, more  radical  measures  were  adopted.  Dec. 
17,  1874,  an  act^  was  passed  authorizing  the 
appointment  of  commissioners  to  liquidate  and 
adjust  all   claims  against  the  State  arising  from 

1  Laws  of  Alabama  for  1872-73,  p.  45. 

2  The  three  roads  were :  The  South  and  North  Alabama  Rail- 
road, the  Mobile  and  Alabama  Grand  Trunk,  and  the  Savannah  and 
Memphis.  The  total  amount  of  new  bonds  issued  was  $1,156,000, 
and  the  total  amount  of  indorsed  bonds  retired  was  $4,024,000.  — 
Financial  Chronicle,  June  19,  1875. 

3  Laws  of  Alabama  for  1874,  p.  102. 


IN  MISSISSIPPI,  FLOEIDA,  AND  ALABAMA.    61 

bonds  issued  or  indorsed.  Three  commissionei-s 
were  accordingly  selected.  After  devoting  two 
years  to  their  task,  they  reported  a  plan  for  the 
settlement  of  the  debt,  which  plan  was  communi- 
cated to  the  legislature  by  the  Governor,  and 
on  Feb.  23,  1876,  embodied  in  a  funding  act.^ 
Previous  to  this  a  new  constitution  had  been 
adopted  which  prohibited  the  State  from  engaging 
in  any  works  of  internal  improvement,  or  from 
lending  her  credit  to  any  individual  association  or 
corporation.  It  also  limited  the  amount  of  debt 
that  might  be  contracted  to  $1,000,000.2 

The  following  are  the  chief  features  of  the 
funding  act :  — 

1.  All  the  indorsed  railroad  bonds  except  those 
held  by  the  Alabama  and  Chattanooga  Railroad 
were  omitted  from  the  provisions  of  the  act.  These, 
with  accrued  interest,  amounted  to  $4,705,000. 

2.  The  ordinary  debt  of  the  State  was  described 
as  class  "A."  For  the  principal  of  this,  new 
bonds  were  to  be  exchanged,  dollar  for  dollar,  to 
be  dated  July  1,  1876,  to  be  payable  in  thirty 
years,  and  to  bear  interest  at  two  per  cent  for  five 
years,  three  per  cent  for  five  years,  four  per  cent 
for  the  succeeding  ten  years,  and  five  per  cent 
thereafter  until  maturity.  The  authorized  bonds 
of  this  class  aggregated  $7,127,709.     The  interest 

1  Laws  of  Alabama  for  1875-7G,  p.  130. 

2  See  Art.  IV.  Sec.  54 ;  and  Art.  X.  Sec.  3  of  the  constitution 
of  1875. 


62  REPUDIATION  OF  STATE  DEBTS 

which  had  accrued  for  a  number  of   years  was 
repudiated. 

3.  The  bonds  issued  under  the  "  4,000  per  mile 
act"  were  designated  as  class  "B."  The  amount 
recognized  was  $1,192,000,  in  exchange  for  which 
new  bonds  to  the  amount  of  $596,000  were  author- 
ized to  be  issued,  to  bear  interest  at  five  per  cent, 
but  to  be  in  other  respects  like  those  in  class 
"A."     ■ 

4.  As  class  "  C "  were  designated  the  bonds 
indorsed  for  the  Alabama  and  Chattanooga  Rail- 
road. These  amounted  to  $5,300,000,  and  they 
were  authorized  to  be  exchanged  for  new  bonds 
aggregating  in  amount  $1,000,000.  These  bonds 
were  to  mature  in  thirty  years,  and  to  bear  interest 
at  two  per  cent  for  tbe  first  five  years,  and  at  four 
per  cent  thereafter. 

5.  The  indebtedness  to  the  educational  fund 
amounting  to  $2,810,670,  and  five  per  cent  State 
certificates  amounting  to  $1,040,000,  were  to  be 
treated  in  the  same  manner  as  the  bonds  in  class 
"A." 

In  payment  of  the  $2,000,000  of  bonds  issued 
directly  to  the  Alabama  and  Chattanooga  Railroad 
Company,  land  granted  to  that  company,  variously 
estimated  in  amount  at  from  500,000  to  1,200,000 
acres,  was  turned  over  to  the  bondholders. 

Summarizing  the  above,  we  have  the  following 
table,^  showing  the  amount  of  the  old  debt  and  the 

1  Taken  from  the  Financial  Chronicle  for  Jan.  13,  1877. 


IN  MISSISSIPPI,  FLORIDA,  AND  ALABAMA.    63 

amount  of  new  bonds  autliorized  to  be  issued  for 
their  payment :  — 

Old  debt.  New  debt 

authorized. 

Five  per  cent  State  certificates  $1,040,000  §1,040,000 

Educational  fund  indebtedness  2,810,670  2,810,070 

Total  of  class  "  A "   .     .     .     .  7,410,800  7,127,709 

Total  of  class  "  B  "    ....  1,192,000  590,000 

Total  of  class  "  C  "    ....  5,300,000  1,000,000 

Total §18,759,470      $12,574,379 

Unprovided  for  except  as  above 

explained  1 2,000,000 

State  indorsements  left  unpro- 
vided for   ......  4,705,000 

Total  old  debt  (principal) .      §25,404,470 

If  to  the  difference  between  these  two  totals  be 
added  the  overdue  interest  on  these  various  classes 
of  bonds,  the  amount  of  Alabama's  repudiation  will 
be  not  far  from  115,000,000. 

1  See  page  C2. 


III. 


REPUDIATION   IN   NORTH   CAROLINA 
AND   SOUTH    CAROLINA. 


CHAPTER  III. 

REPUDIATION    IN    NORTH    CAROLINA   AND    SOUTH 
CAROLINA. 

North  Carolina. 

The  State  debt  of  North  Carolina  was  for  the 
most  part  contracted  betAveen  the  years  1848  and 
18T0,  About  the  latter  date  suspicions  were 
aroused  concerning  the  validity  of  a  portion  of 
it;  and  the  result  was  not  only  a  stoppage  of  its 
growth,  but  a  diminution  of  its  amount  by  repudi- 
ation and  scaling.  In  order  to  understand  the 
grounds  for  the  State's  action,  it  is  necessary  to 
note  carefully  the  following  analysis  of  the  debt 
as  presented  in  the  treasurer's  report  for  the  fiscal 
year  ending  Sept.  30,  1871. 

1.  The  debt  contracted  previous  to  the  formal 
declaration  of  the  secession  of  the  State  on  May  20, 
1861.  —  The  principal  of  this  debt  in  1871  was 
$8,761,245.  Most  of  it  was  contracted  under 
authority  of  a  series  of  acts  dating  from  1848  to 
1858,  authorizing  the  issue  of  State  bonds  in  aid 
of  railroad,  plank  road,  and  canal  companies.  As 
security  for  the  bonds  thus  issued,  the  State 
received  stock  in  these  enterprises.^ 

1  For  a  list  of  these  acts,  see  Tenth  Census,  vol.  vii.  p.  567. 
67 


68  REPUDIATION  OF  STATE  DEBTS. 

2.  Bonds  issued  during  the  war  for  other  than 
war  purposes,  —  Of  these  bonds,  $913,000  were 
dated  Oct.  1,  1861,  and  July  1,  1862,  and  were 
made  payable  in  "  good  and  lawful  money  of  the 
Confederate  States."  On  this  account  they  had 
no  market  value,  and  the  State  failed  to  recognize 
them,  although  they  were  in  general  terms  declared 
valid  by  the  ordinance  of  the  convention  of  1865-66, 
which  declared  all  debts  binding  not  incurred  in 
aid  of  the  rebellion.  To  this  class  also  belong 
bonds  to  the  amount  of  $215,000,  dated  Jan. 
1,  1863,  and  issued  in  aid  of  the  Chatham  Rail- 
road Company. 

3.  Bonds  issued  after  the  war  in  pursuance  of 
acts  passed  before  the  war.  —  The  total  amount 
thus  issued  was  $2,647,000,  of  which  bonds  to  the 
amount  of  $430,000  were  issued  to  the  Wilming- 
ton, Charlotte,  and  Rutherford  Railroad,  and  the 
residue  to  the  Western  North  Carolina  Railroad. 
In  order  to  secure  the  bonds  issued  to  the  latter 
road,  the  State  hypothecated  stock  which  she  held 
in  the  North  Carolina  Railroad,  upon  which  there 
was  a  previous  mortgage.  Upon  the  former  road 
the  State  was  given  a  first  mortgage,  which  she 
subsequently  sacrificed  by  giving  the  bonds  of  the 
road  the  precedence  in  lien.^ 

4.  Bonds  issued  under  authority  of  the  funding 
acts   of  March  10,  1866,  and  Aug,  20,  1868.2  — 

1  See  Treasurer's  Report  for  1874,  and  Financial  Chronicle  for 
Fob.  14  of  the  same  year. 

3  Laws  of  1866,  p.  05;  and  Laws  of  1868. 


REPUDIATION  IN    THE   CAROLINAS.  69 

These  acts  authorized  the  funding  of  overdue  bonds 
and  coupons.  The  total  amount  issued  under  the 
first  act  was  $2,417,400,  and  under  the  second 
$1,721,400.^ 

5.  Bonds  issued  to  the  Chatham  Railroad  Com- 
pany to  the  amomit  of  $1,200,000,  and  to  the  Wil- 
liamston  and  Tarhoro  Railroad  Company  to  the 
amount  of  $150,000. 

6.  The  "  Special  Tax  Bonds^  —  These  were 
issued  after  the  adoption  of  the  constitution  of 
April,  1868,  which  forbade  the  issue  of  any  bonds 
without  at  the  same  time  providing  for  the  annual 
interest  by  the  levy  of  a  special  tax.2  $16,240,000 
of  these  bonds  were  issued  to  six  railroads,  and 
stock  in  these  roads  was  given  to  the  State  as 
security. 

The  State  was  responsible  for  interest  on  all 
these  bonds  at  the  rate  of  six  per  cent  per  annum. 
She  had  expected  to  pay  this  heavy  annual  charge 
out  of  the  income  to  be  derived  from  her  $22,000,- 
000  of  stock,  but  unfortunately  the  public  enter- 
prises, to  which  aid  had  been  given,  were  not 
profit-bearing.  With  the  exception  of  $3,000,000, 
issued  by  the  North  Carolina  Railroad,  this  stock 
never  yielded  her  any  income,  and  could  not  be 
sold  on  the  exchanges.  The  whole  burden,  there- 
fore, rested  upon  the  shoulders  of  the  people ;  and 
that  its  weight  was  hard  to  bear  may  be  deduced 

1  See  Tenth  Census,  vol.  vii.  p.  567. 

2  §ee  Art.  y,  Sec.  5. 


70  REPUDIATION   OF  STATE  DEBTS. 

from  the  message  of  Governor  Holden  in  1870,  in 
which  he  stated  that  the  total  interest  charge,  to- 
gether with  the  ordinary  expenses  of  the  State 
government,  required  a  tax  of  $2,500,000  per  an- 
num, which  had  to  be  assessed  on  a  total  property 
valuation  of  1115,000,000.^  Under  these  circum- 
stances it  is  not  surprising  that  the  State  constantly 
defaulted  in  her  interest  payments.^ 

As  soon  as  the  weight  of  this  burden  was  fully 
appreciated,  the  people  began  to  ask  whence  and 
why  it  came.  The  fact  that  in  the  five  years  since 
the  close  of  the  war  the  State  debt  had  more  than 
doubled,  without  her  assets  and  income  having 
been  correspondingly  increased,  could  not  but  pro- 
voke surprise  and  suspicion  of  bad  financiering,  if 
not  of  fraud.  A  little  investigation  showed  that 
many  of  these  State  bonds  had  been  squandered  by 
the  railroad  companies,  and  not  used  for  the  con- 
struction of  their  roads.  In  his  message  ^  deliv- 
ered to  the  legislature,  Nov.  20,  1871,  Governor 
Caldwell  stated  that  the  bonds  of  classes  3  and  5 
had  been  sold  for  not  more  than  fifty  cents  in  gold, 
or  sixty-five  or  sixty-six  cents  in  currency,  and  tliat 
"special  tax  bonds"  had  been  sold  in  a  reckless 
and  gambling  manner,  and  some  of  them  at  prices 
ranging  from  ten  to  thirty  cents.     He  also  stated 

1  Financial  Chronicle  for  March  4,  1871. 

*  According  to  the  Governor's  message  to  the  legislature,  deliv- 
ered Nov.  20,  1871,  unpaid  interest  to  the  amount  o£  $4,987,419.04 
had  accumulated  up  to  that  date. 

8  See  Financial  Chronicle  for  Dec.  2, 1871- 


REPUDIATION  IN   THE   CAROLINAS.  71 

that  there  was  abundant  proof  in  support  of  the 
claim  that  the  proceeds  of  the  bonds  had  been  in 
many  instances  misappropriated.^ 

The  "  special  tax  bonds  "  came  under  condemna- 
tion first  and  chiefly.  The  legislature  of  1870 
passed  three  acts  ^  concerning  them.  The  first 
one,  approved  Jan.  20,  directed  the  treasurer  to 
pay  no  more  interest  on  them  until  he  should  re- 
ceive further  orders.  Previous  to  this  he  had  col- 
lected 8484,859  for  this  purpose,  and  had  actually 
paid  coupons  to  the  amount  of  $208,470.^  The 
second  one  was  passed  on  Feb.  5,  and  provided 
that  bonds  then  in  the  hands  of  the  various  com- 
panies should  only  be  issued  after  certificates  had 
been  presented  showing  that  a  certain  amount  of 
work  had  been  actually  done.  A  third  act,  passed 
March  8,  1870,  repealed  all  the  special  tax  acts, 
including  not  only  the  sections  providing  for  the 
levy  of  the  special  tax,  but  the  whole  of  the  acts 
in  which  these  sections  were  contained.  It  pro- 
vided that  all  bonds  then  in  the  hands  of  the  offi- 
cers of  the  corporations  to  which  aid  had  been 
granted  should  be  returned  to  the  treasurer,  and 
appropriated  all  taxes  collected  under  these  special 
acts  to  the  uses  of  the  State  government. 

From  the  passage  of  this  latter  act  the  debt  con- 
troversy may  be  said  to  date.     Interest  payments 

1  For  specific  charges,  see  Financial  Chronicle  for  March  4, 1871. 

2  Laws  of  1869  and  1870,  pp.  78,  119,  and  336. 

3  See  Note  1  above. 


72  REPUDIATION  OF  STATE  DEBTS. 

then  ceased,^  and  the  debt  thus  increased  rapidly. 
Compromise  or  repudiation,  or  both,  became  each 
year  more  and  more  inevitable.  Holders  of  coupons 
of  some  of  the  "special  tax  bonds  "  applied  to  the 
courts  for  a  mandamus  to  compel  the  collection  of 
the  special  tax  for  their  payment,  but  without 
avail.  They  alleged  that  the  act  of  March  8,  1870, 
impaired  the  obligation  of  the  State's  contract  with 
the  bondholders,  and  was,  therefore,  repugnant  to 
the  Constitution  of  tlie  United  States,  and  that  it 
violated  also  Section  8,  Article  V.  of  the  State 
constitution,  which  prohibited  the  use  for  any  other 
purpose  of  money  collected  for  the  payment  of 
interest  on  "special  tax  bonds."  The  Superior 
Court  of  Wake  County,  however,  decided  that  the 
agent  of  the  State  had  exceeded  his  powers  in  the 
issue  of  these  bonds,  the  roads  not  having  first 
complied  with  the  required  conditions,  and  that 
they  were  for  this  reason  invalid.^ 

The  legislature  of  1871  made  a  laudable  attempt 
to  settle  a  part  of  the  debt  by  passing  an  act  au- 

1  The  State  was  compelled  to  pay  interest  in  part  on  those  hbnds 
for  the  security  of  which  she  had  hypothecated  her  stock  in  the 
North  Carolina  Railroad.  This  stock  paid  dividends,  and  the 
courts  decided  that  the  income  from  this  source  must  be  devoted 
to  the  payment  of  the  interest  on  the  bonds  for  which  the  stock 
was  pledged  as  security.  —Financial  Chronicle  for  Jan.  24,  1871. 

^  An  article  of  impeachment  was  brought  against  Governor 
Holden,  based  on  the  charge  that  he  issued  $2,640,000  of  these 
bonds,  although  the  president  of  the  company  had  not  funiished  him 
the  certificate  required  by  law.  The  Governor  claimed  that  the 
certificate  had  been  presented,  but  afterwards  lost.  —  Financial 
Chronicle,  March  4,  1871. 


REPUDIATION  IN   THE   CAROLINAS.  73 

thorizing  the  exchange  of  the  stock  owned  by  the 
State  for  her  bonds ;  but  since  most  of  this  stock 
was  practically  valueless,  this  attempt  availed 
nothing.  Though  the  offer  to  make  this  exchange 
was  advertised  for  six  months  in  three  New  York 
papers,  not  a  single  proposal  was  received  by 
the  State. ^  Litigation  in  regard  to  the  "  special 
tax  bonds,"  which  rendered  it  uncertain  how  much, 
if  any,  interest  on  them  the  State  would  be  obliged 
to  pay,  prevented  the  passage  of  any  compromise 
act  before  1875.  The  conviction  was  general  that 
the  State  could  not  pay  all  her  debts,  and  that 
she  could  not  support  her  annual  interest  charge. 
On  this  point  the  treasurer,  in  his  annual  report 
for  the  fiscal  year  ending  Sept.  30,  1873,  said: 
"  Omitting  special  tax  bonds  altogether,  the  inter- 
est on  the  rest  of  the  debt,  supposing  our  accrued 
interest  to  be  funded,  would  be  $1,406,663.99  per 
annum,  or  one  and  three-fifths  per  cent  of  the  real 
and  personal  property.  Add  an  amount  for  county 
taxation  equal  to  the  State  government  expenses, 
and  we  have,  outside  the  towns  and  cities,  two 
and  one-tenth  per  cent  of  our  property.  And  in 
many  of  the  cities  and  towns  the  levies  for  mu- 
nicipal purposes  are  as  large,  if  not  larger.  Now 
add,  as  the  holders  of  special  tax  bonds  propose,  a 
tax  of  f 855,090,  or  three-fourths  per  cent  on  the 
property,  and  we  have  a  grand  total  of  two  and 
eight-tenths  per  cent. 

1  See  Financial  Chronicle  for  Dec.  13,  1873. 


74  REPUDIATION  OF  STATE  DEBTS. 

*'  It  is  manifest  that  our  people  cannot  and  will 
not  pay  such  enormous  levies.  Any  attempt  to 
enforce  it  would  result  in  total  repudiation." 

After  the  people  had  become  convinced  that  the 
payment  of  tha  interest  on  the  special  tax  bonds 
could  not  be  enforced  in  the  courts,  there  was 
nothing  to  prevent  a  compromise  of  the  remainder 
of  the  debt,  and  an  act  ^  was  passed  with  that  ob- 
ject in  view  on  Marcli  17,  1875.  It  provided  for 
the  issue  of  bonds  to  be  known  as  "  consolidation 
bonds,"  and  to  bear  interest  at  two  per  cent  for  two 
years,  three  per  cent  for  three  years,  four  per  cent  for 
five  years,  and  five  per  cent  for  twenty  years,  at 
which  time  the  principal  was  to  fall  due.  It  provided 
that  these  bonds  should  be  exchanged  for  outstand- 
ing bonds  of  the  State  at  the  following  rates :  — 

1.  For  bonds  issued  before  May  20,  1861,  at  the 
rate  of  forty  cents  on  the  dollar. 

2.  For  those  issued  under  the  funding  acts  of 
March  8,  1866,  and  Aug.  20,  1868,  at  the  rate  of 
twenty-five  cents  on  the  dollar. 

3.  For  those  issued  since  May  20,  1861,  in  pur- 
suance of  acts  passed  before  that  time,  and  for 
bonds  issed  to  the  Chatham  Railroad  Company,  at 
the  rate  of  twenty-five  cents  on  the  dollar. 

The  total  debt  recognized  by  this  act  was  about 
$21,500,000 ;  while  the  debt  of  the  State,  all  told, 
including  )$13,000,000  of  unpaid  interest,  accord- 
ing to  the  Governor's  message  to  the  legislature 
in  December,  1876,  amounted  to  $41,846,930.45. 

1  Laws  of  1874-75,  p.  202. 


REPUDIATION  IN  THE  CABOLINAS.  75 

This  act  was  naturally  displeasing  to  the  bond- 
holders. Against  most  of  the  bonds  which  were 
fundable  under  it,  no  charge  of  illegality  had  been 
or  could  be  brought,  and  it  was  thought  that  the 
State  was  able  to  pay  a  much  larger  percentage  of 
their  face  value  than  the  act  authorized.  So  few 
persons  signified  their  willingness  to  exchange 
their  bonds  in  accordance  with  its  provisions  that 
the  treasurer  did  not  feel  justified  in  going  to  the 
expense  of  having  bonds  engraved.  When  the 
legislature  met  in  1876,  nothing  whatever  had 
been  done  towards  carrying  the  act  into  execution, 
and  it  was  evident  that  this  attempt  to  compromise 
had  failed. 

Before  making  a  second  attempt  it  was  thought 
best  to  consult  the  bondholders,  and  to  learn,  if 
possible,  what  terms  they  would  be  willing  to  ac- 
cept. Accordingly,  at  the  suggestion  of  Governor 
Vance,  a  committee  of  the  legislature  was  ap- 
pointed to  consult  with  a  committee  of  the  bond- 
holders. A  meeting  was  held  in  March,  and 
propositions  were  made  by  both  parties.  The 
legislative  committee  proposed  to  settle  on  a  basis 
of  $6,000,000  ;  in  other  words,  to  scale  the  debt 
about  sixty-six  and  two-thirds  per  cent.  The  bond- 
holders declined  this  proposition,  and  proposed  a 
basis  of  f  10,000,000,  or  a  compromise  at  about  fifty 
cents  on  the  dollar  !  ^  Not  being  able  to  agree,  it 
was  finally  decided  to  leave  the  matter  to  a  com- 

1  See  Financial  Chronicle  for  March  10, 1877. 


76  REPUDIATION  OF  STATE  DEBTS. 

mission  consisting  of  the  Governor,  Treasurer,  At- 
torney-General, and  two  members  of  each  branch 
of  the  legislature.  This  commission  was  expected 
to  consult  with  bondholders  directly,  and  to  decide 
upon  a  basis  of  settlement. 

There  was  not  time  for  the  commission  to  per- 
form its  duties  before  the  close  of  the  legislative 
session  of  1877,  and,  indeed,  it  never  took  any  steps 
in  the  direction  of  executing  its  functions.  Gov- 
ernor Vance,  in  his  message  to  the  next  legislature, 
stated  that  inasmuch  as  the  commission  was  given 
power  neither  to  make  nor  to  receive  any  proposi- 
tion, it  was  not  thought  worth  while  to  have  any 
consultation  with  bondholders. 

The  legislature  of  1879  had  the  honor  and  the 
credit  of  framing  a  compromise  act  which  succeeded 
at  least  in  putting  an  end  to  the  controversy,  and 
in  bringing  the  matter  to  a  final  settlement.  The 
terms  offered  in  the  act  it  passed  were  no  better 
tlian  those  offered  by  the  act  of  1875,  but  the  bond- 
holders had  by  this  time  learned  that  they  must 
accept  this  offer  or  nothing,  and  with  such  an 
alternative  but  one  choice  was  sensible.  The  act  ^ 
in  question  was  passed  March  4,  1879,  and  pro- 
vided for  the  issue  of  bonds  to  be  dated  July  1, 
1880,  to  run  for  thirty  years,  and  to  bear  interest 
at  four  per  cent.  The  conditions  under  which 
these  bonds  were  to  be  exchanged  for  outstanding 
bonds  of  the  State  were  as  follows :  — 

1  Laws  of  1879,  p.  183. 


BEPUDIATION  IN   THE   CAIiOLINAS.  77 

1.  Bonds  issued  before  May  20,  1861,  were  to 
be  exchanged  for  the  new  bonds  at  the  rate  of 
1100  of  the  former  for  $40  of  the  latter. 

2.  Western  North  Carolina  Railroad  aid  bonds 
of  1865  and  1867,  Chatham  Railroad  aid  bonds  of 

1867,  Williamston  and  Tarboro  Railroad  bonds  of 

1868,  Western  Railroad  aid  bonds  of  October,  1861, 
Wilmington,  Charlotte,  and  Rutherford  Railroad 
bonds  of  1862,  and  registered  certificates  of  the 
literary  fund,  were  to  be  scaled  seventy-five  per 
cent, 

3.  Bonds  issued  in  pursuance  of  the  funding 
acts  of  March  10, 1866,  and  Aug.  20,  1868,  were  to 
be  scaled  eighty-five  per  cent. 

The  act  further  provided  that  to  the  payment  of 
the  interest  on  the  new  bonds  "all  State  taxes  col- 
lected from  professions,  trades,  incomes,  merchants, 
dealers  in  cigars,  or  three-fourths  of  all  taxes  col- 
lected from  wholesale  and  retail  dealers  in  spirit- 
ous,  vinous,  and  malt  liquors  "  should  be  devoted. 
In  case  the  fund  derived  from  these  sources  should 
prove  inadequate,  the  treasurer  was  authorized  to 
devote  to  this  purpose  any  funds  in  the  treasury 
not  appropriated  to  other  purposes;  and  if  with 
these  funds  he  was  unable  to  meet  the  annual  in- 
terest charge,  he  was  authorized  to  issue  six  per 
cent  coupon  bonds  to  run  for  forty  years  and  to  be 
redeemable  in  ten  years.  The  total  amount  of 
bonds  authorized  to  be  exchanged  was  $18,892,645 ; 
and,  according  to  the  above-mentioned  rates,  the 


78  EEPUDIATION  OF  STATE  DEBTS. 

total  amount  of  new  bonds  authorized  aggregated 
$5,006,616.  The  bonds  which  were  repudiated  in 
toto  amounted  in  principal  to  112,805,000.  To 
this  must  be  added  several  millions  of  unpaid  in- 
terest which  had  accrued  on  the  recognized  and 
unrecognized  bonds,  none  of  which  was  authorized 
to  be  funded. 

South  Carolina. 

Previous  to  the  war  South  Carolina  had  con- 
tracted a  debt  amounting  to  |3,814,862.91.i  Up 
to  that  time  her  credit  had  been  excellent,  and  the 
management  of  her  finances  liad  been  conservative 
and  honest.  A  war  debt  of  nearly  #3,000,000  was 
contracted,  but  was  per  force  subsequently  ignored. 
When  the  legislature  met  in  1866  a  considerable 
amount  of  interest  was  overdue,  and  several  issues 
of  bonds  had  matured.  To  meet  these  obligations 
a  funding  act  was  passed  on  Sept.  21,  1866,  which 
was  supplemented  by  an  act  of  Dec.  20,  1866,  and 
which  authorized  the  issue  of  bonds  or  stocks, 
one-half  to  be  payable  Jan.  1,  1887,  and  the  other 
half  in  1897," and  to  bear  interest  from  July  1, 
1867,  at  the  rate  of  six  per  cent  per  annum.  The 
same  session  authorized  the  issue  of  bills  receiv- 
able for  which  the  faith  and  credit  of  the  State 
were   subsequently   pledged.^     By  these   means, 

1  This  included  some  debts  contracted  in  18G1  and  1863  which 
were  not  for  war  purposes,  and  hence  allowed.  (Financial  Chron- 
icle for  Marclj  11, 1871.) 

2  Acts  of  180G,  special  session,  p.  383. 


REPUDIATION  IN   THE   CAROLINAS.  79 

and  on  account  of  the  inability  of  the  State  to  pay 
accruing  interest,  the  debt  grew  by  October,  1867, 
to  nearly  five  and  one-half  millions  of  dollars.^ 
During  the  next  three  years  the  obligations  of  the 
State  increased  enormously.  To  what  extent  and/ 
for  what  reason  it  is  impossible  to^  state  accurately.  ^ 
The  records  are  so  confused,  and  the  reports  of 
officials  so  conflicting,  that  scarcely  any  two  "|)er- 
sons  who  have  investigated  the  matter  have  agreed 
on  the  exact  figure  of  the  debt. 

The  acts  which  authorized  the  increase  of  in- 
debtedness during  the  period  were  the  following :  — 

1.  An  act  2  passed  Aug.  26,  1868,  entitled  "An 
act  to  authorize  a  loan  to  redeem  the  obligations 
known  as  bills  receivable  of  the  State  of  South 
Carolina."  Tlie  amount  of  bonds  authorized  by 
this  act  was  $500,000. 

2.  An  act^  authorizing  a  loan  of  11,000,000,  or 
so  much  thereof  as  might  be  necessary,  to  pay 
interest  on  the  public  debt.  The  bonds  to  be 
issued  for  this  loan  were  to  bear  six  per  cent 
interest,  and  were  to  be  redeemable  in  twenty 
years.  The  amount  of  bonds  to  be  issued  was  not 
definitely  stated,  only  the  amount  of  the  loan  being 
designated.  Subsequently  a  dispute  arose  regard- 
ing the  true  meaning  of  the  act,  the  State  officials 
claiming  that  it  authorized  the  issue  of  such  an 

1  The  Financial  Chronicle  for  Nov.  11, 1871,  gives  $5,407,215  as 
the  exact  figure. 

2  Laws  of  South  Carolina  for  1868,  p.  18. 

3  Jhid.,  p.  10. 


80  BEPUDIATION  OF  STATE  DEBTS. 

amount  of  bonds  as  would  realize  11,000,000  in 
cash,  while  others  claimed  that  it  authorized  the 
issue  of  such  a  number  of  bonds  as  would  aggre- 
gate 11,000,000  in  face  value. 

3.  An  act^  passed  Sept.  15,  1868,  which  pro- 
vided for  the  issue  of  bonds  dated  Jan.  1,  1869, 
payable  in  twenty  years  with  interest  at  six  per 
cent,  for  the  funding  of  the  bills  of  the  Bank  of 
the  State  of  South  Carolina.  This  bank  was  es- 
tablished in  1812.  The  State  was  the  only  stock- 
holder, and  its  bills  were  declared  by  the  courts  to 
be  receivable  for  taxes.  The  act  of  1868  was  de- 
signed to  close  up  its  affairs.  Under  it  bonds 
aggregating  $1,258,550  were  issued.^ 

4.  On  the  same  day,  Sept.  15,  1868,  another 
act  ^  was  passed  authorizing  the  granting  of  aid  to 
the  Blue  Ridge  Railroad  Company  to  tlie  extent 
of  $4,000,000.  Bonds  of  this  amount  were  deliv- 
ered to  the  company,  and  the  financial  agent  of  the 
State  advanced  money  on  them  from  time  to  time 
in  pursuance  of  an  act  of  the  legislature  author- 
izing him  so  to  do.  The  railroad  company,  how- 
ever, found  itself  unable  to  pay  the  interest  on 
these  bonds ;  and  the  State,  thereupon  becoming 
liable,  agreed  to  exchange  for  them  revenue  scrip 
to  the  amount  of  11,800,000,  which  should  be  re- 
ceivable for  all  dues  to  the  State  except  taxes  for 

1  Laws  of  South  Carolina  for  1868,  p.  22. 
«  Financial  Chronicle  for  Nov.  11,  1871. 
8  Laws  of  South  Carolina  for  18G8,  p.  20. 


ilk 


REPUDIATION  IN   THE   CAROLINAS.  81 

interest  on  the  public  debt.     This  issue  of  scrip 
was  subsequently  declared  unconstitutional.^ 

5.  Feb.  17,  1869,  an  act'^  was  passed  entitled 
'•  An  act  to  authorize  a  loan  for  the  relief  of 
the  treasury."  It  provided  that  $1,000,000 
might  be  borrowed  upon  coupon  bonds  to  bear 
interest  at  seven  per  cent  from  Jan.  1,  1869,  and 
to  be  redeemable  at  the  pleasure  of  the  State 
within  twenty  years.  This  act,  like  the  one  au- 
thorizing a  million-dollar  loan  for  the  payment  of 
interest  on  the  public  debt,  did  not  designate  the 
total  number  of  bonds  that  might  be  issued. 

6.  An  act^  was  passed  March  27,  1869,  creating 
the  office  of  Land  Commissioner,  and  making  it 
the  duty  of  this  officer  to  purchase  improved  or 
unimproved  land  suitable  for  cultivation,  and  for 
the  purpose  of  resale  in  small  farms  to  actual  set- 
tlers on  reasonable  credit.  Bonds  to  the  amount 
of  1700,000  *  were  issued  under  authority  of  this 
act. 

7.  March  23,  1869,  an  act^  was  passed  authoriz- 
ing what  were  called  ''  conversion  bonds."  It  pro- 
vided for  the  exchange  of  any  stock  of  the  State 
for  coupon  bonds  of  equal  amount,  bearing  interest 
at  six  per  cent  and  payable  in  twenty  years. 


1  See  Tenth  Census,  vol.  vii.  p.  573 ;  also  Financial  Chronicle  for 
Nov.  11,  1871. 

2  Laws  of  South  Carolina  for  18G9,  p.  182.         3  lUd.,  p.  275. 
4  Financial  Chronicle  for  Nov.  11,  1871. 

»  Laws  of  South  Carolina  for  18G9,  p.  241. 


82  REPUDIATION  OF  STATE  DEBTS. 

8.  Another  act,^  passed  March  26,  1869,  gave 
the  financial  agent  of  the  State  in  New  York  City 
authority  to  pledge  State  bonds  as  collateral  secu- 
rity for  money  which  he  might  advance  to  the  Stat», 
and  for  other  purposes. 

9.  Still  another  act^  was  passed  March  7,  1871, 
creating  what  was  known  as  the  sterling  funded  debt. 
This  provided  for  the  issue  of  six  per  cent  coupon 
bonds  aggregating  in  amount  1,200,000  pounds 
sterling,  which  were  to  be  exchanged  for  all  out- 
standing liabilities  of  the  State.  This  act  was 
repealed  March  13,  1872.3 

The  confusion  in  regard  to  the  amount  of  bonds 
which  were  actually  issued  under  these  acts  can 
scarcely  be  accounted  for  on  any  theory  which  will 
not  reflect  upon  the  honor  and  integrity  of  the 
State  officials.  Indeed,  an  abundance  of  facts  point 
to  their  corruption  and  extravagance,*  and  lend 
support  to  the  claim  made  on  all  sides  that  the 
State  was  being  mercilessly  fleeced  by  her  own 
legally  appointed  guardians.^  The  State  Treasu- 
rer's report,  the  Governor's  message  to  the  legisla- 

1  Laws  of  South  Carolina  for  1869,  p.  258. 

2  Ibid.,  1871,  p.  616. 

3  Ij^id.,  1872,  p.  193. 

*  See  page  87. 

*  The  "  Report  of  the  Joint  Special  Financial  Investigating 
Committee,"  p.  2595,  says:  "The  Taxpayers'  Convention;  the 
Governor  in  his  financial  '  statement ; '  the  Comptroller  General 
in  his  reports  and  ready  exhibits ;  the  present  committee  in  its 
already  comi)iled  figures,  showing  past  and  present  issues ;  the 
bonded  debt  of  the  State  as  made  out  from  the  books  of  tlie  State 
Treasurer  and  Comptroller  General,  all  fail  to  compute  the  actual 
liabilities  imposed  upon  and  withheld  from  the  people  by  organ- 


REPUDIATION  IN   THE   CAROLINAS.  83 

ture  of  1871,  and  the  report  ^  of  the  investigating 
committee  appointed  by  this  legislature,  agree  that 
bonds  to  the  amount  of  122,540,000  were  printed 
by  the  American  Bank  Note  Company  for  the  pur- 
pose of  carrying  these  acts  into  execution.  That 
this  amount  was  largely  in  excess  of  what  the  acts 
authorized  under  any  possible  construction  of  their 
meaning  was  generally  admitted,  and  the  reason  for 
having  had  such  a  large  number  printed  could  not 
be  satisfactorily  explained  by  the  officials.  They 
pretended,  however,  to  be  able  to  account  for  them 
all.  The  Governor's  message  mentioned  above, 
and  also  the  Treasurer's  report,  entered  into  an 
elaborate  explanation  of  their  disposition,  tlie  up- 
shot of  which  was  that  only  19,314,000  of  the  total 
122,540,000  had  been  actually  used,  15,541,000 
having  been  sold,  and  13,773,000  having  been  put 
into  the  hands  of  the  financial  agent  as  collateral 
security  for  loans.  Of  the  remaining  $13,026,000, 
some  were  accounted  for  as  on  hand  in  the  State 
treasury,  others  as  deposited  for  safe  keeping  with 
the  American  Bank  Note  Company,  and  still  others 
as  cancelled  and  destroyed.^ 

ized  and  fraudulent  means,  while  the  world  holds  its  breath  at  the 
recital  of  the  devices  as  well  as  the  fearful  collusions  of  the  league 
which,  worse  than  the  highwayman,  has  not  only  robbed  its  vic- 
tim, the  State,  of  all  its  funds,  but  of  its  fair  fame  and  credit." 

1  See  Senate  Journal  of  South  Carolina  for  the  session  1871-72, 
pp.  8  and  260 ;  also  Tenth  Census,  vol.  vii.  pp.  571  and  572,  and 
Financial  Chronicle  for  Dec.  2,  1871. 

2  These  reports  may  be  found  in  "  Reports  and  Resolutions  of 
the  General  Assembly  of  the  State  of  South  Carolina  at  the  regu- 
lar session,  1871-72." 


84  REPUDIATION  OF  STATE  DEBTS. 

These  statements  of  the  officials,  however,  did 
not  satisfy  the  legislature  and  the  public.  The 
former  believed  that  there  had  been  an  overissue 
of  bonds,  and,  early  in  the  session  which  began 
Nov.  28,  1871,  appointed  a  committee  to  inves- 
tigate the  matter.  This  committee  made  a  re- 
port to  the  House  on  Dec.  14,  of  which  the  fol- 
lowing is  an  extract :  "  The  whole  amount  of 
the  bonded  debt  of  the  State  as  shown  by  the 
report  of  the  Comptroller  General  on  the  31st 
of  October,  1868,  was  85,407,306.27,  exclusive  of 
what  is  known  as  the  war  debt.  To  this  amount 
add  the  bonds  issued  to  redeem  the  bills  of  the 
bank  of  the  State,  $1,258,550,  making  the  old 
debt  $6,665,858.27.  To  this  amount  was  added, 
during  the  years  1869  and  1870,  $500,000  in  bonds 
which  had  been  issued  to  pay  interest  on  the  pub- 
lic debt,  and  had  been  sold  by  the  Financial  Agent, 
making  the  bonded  debt  of  the  State  on  the  3d  of 
October,  1870,  $7,665,856.27.  There  was  also  at 
the  same  time  in  the  hands  of  the  Financial  Agent 
$1,000,000  of  bonds  for  the  relief  of  the  treas- 
ury, $500,000  to  pay  interest  on  the  public  debt, 
and  $700,000  land  commission  bonds,  making  a 
grand  total  of  $9,665,856.27,  and  showing  that 
only  $3,200,000  new  bonds  have  been  issued  up  to 
the  31st  of  October,  1870,  to  wit :  — 

Bonds  to  redeem  bills  receivable     .     .     .  $500,000 

Bonds  to  pay  interest  on  the  public  debt.  1,000,000 

Bonds  for  relief  of  treasury 1,000,000 

Bonds  Land  Commission 700,000 


§3,200,000 


REPUDIATION  IN   THE   CAROLINAS.  85 

According  to  the  sworn  statement  of  the  State 
Treasurer  there  are  now  signed  and  outstanding 
$9,514,000  new  State  bonds.  Deduct  from  this 
amount  the  83,200,000  that  were  out  on  the  31st 
of  October,  1870,  and  we  find  that  86,314,000  have 
been  signed  and  put  upon  the  market,  which,  in 
the  opinion  of  your  committee,  is  an  over-issue."  ^ 

The  committee  estimated  that  there  were  out- 
standing against  the  State  bonds  to  the  amount 
of  $20,827,608.20,  to  which,  they  said,  must  be 
added  certain  other  items  and  a  contingent  rail- 
road debt  of  $6,787,608.20,  making  a  grand  total 
of  $28,997,608.20.  It  claimed  that  the  State  was 
really  bankrupt  and  utterly  unable  to  support  and 
pay  a  debt  of  this  amount ;  and  this  claim  received 
some  confirmation  from  the  official  statement  for 
the  year  1872-73,  which  showed  that  the  appropri- 
ations amounted  to  $2,418,872,  and  the  receipts 
from  all  sources  to  $1,719,728. 

Other  investigations  into  the  financial  condition 
of  the  State  were  made  by  taxpayers'  associations 
and  by  individuals,  which  investigations  added  to 
the  confusion  of  the  public  mind,  but  confirmed 
the  impression  made  by  the  legislative  committee 
that  outstanding  State  securities  to  the  amount  of 
millions  of  dollars  were  illegal  and  fraudulent. 
This  impression  did  not  bear  fruit  in  repudiation 
until  the  next  legislative  session,  although  before 
that  time  it  had  been  clearly  demonstrated  that 

1  Quoted  from  Financial  Chronicle  of  Dec.  23,  1871. 


86  REPUDIATION  OF  STATE  DEBTS. 

"conversion  bonds"  to  the  amount  of  nearly 
$6,000,000  were  outstanding  against  the.  State 
which  liad  never  been  exchanged  for  other  bonds, 
as  the  law  required,  but  which  had  been  first 
pledged  as  collateral  security  for  loans,  and  then, 
when  the  State  was  unable  to  pay  these  loans, 
issued  to  creditors. 

On  March  13,  1872,  the  legislature  sought  to 
dispel  all  doubts  on  the  debt  question  by  passing 
an  act  ^  declaring  all  bonds  and  stocks  included  in 
the  treasurer's  statement  of  Oct.  31,  1871,  to  be 
legal  and  valid,  and  by  providing  for  the  levy 
of  a  tax  annually  sufficient  to  pay  the  interest  on 
the  State  debt.  The  act  further  provided  for  the 
registration  of  all  bonds,  and  made  such  registra- 
tion a  condition  precedent  to  the  payment  of 
interest. 

This  act  and  others  having  a  similar  object 
failed  to  produce  the  desired  effect.  The  Gov- 
ernor was  obliged  to  announce  in  August,  1872, 
that  excessive  legislative  expenses  had  absorbed 
all  the  money  in  the  treasury,  and  that  the  interest 
falling  due  could  not  be  paid.  The  registration 
operations  proceeded  very  slowly,  owing  to  the 
exorbitant  rates  charged,  and  the  Comptroller 
General  refused  to  levy  a  tax  for  the  payment  of 
the  conversion  bonds  which  had  not  been  ex- 
changed for  other  bonds  in  accordance  with  law. 
He  took  as  a  basis  of  levy  tlie  debt  as  estimated 

•  Laws  of  South  Carolina  for  1871-72,  p.  278. 


REPUDIATION  IN    THE   CAROLINAS.  87 

by  the  Taxpayers'  Convention  in  1871 ;  namely, 
$9,865,900.1  Messrs.  Morton,  Bliss,  &  Co.,  of  New 
York,  applied  for  a  writ  of  mandamus  to  compel 
the  Comptroller  to  levy  the  tax  provided  by  law, 
but  the  courts  granted,  not  all  that  was  asked 
for,  but  a  mandainus  affecting  only  $3,000,000  of 
bonds .2  The  press  of  the  State  gave  currency  to 
arguments  against  the  validity  of  certain  classes 
of  bonds,  and  to  the  allegations  of  corruption  and 
extravagance  made  against  the  State  officials,  and 
created  a  strong  public  sentiment  in  favor  of  the 
repudiation  of  the  illegal  issues  and  the  scaling 
down  of  the  whole  debt  to  such  a  figure  as  would 
bring  the  annual  interest  charge  within  the  ability 
of  the  State  to  pay. 

The  legislature  which  met  in  October,  1873, 
partially  accomplished  the  public  desire  by  the 
passage  on  Dec.  22  of  the  so-called  "consolida- 
tion act."  ^  This  authorized  the  exchange  of  out- 
standing bonds  and  stocks  of  the  State  for  new 
bonds  bearing  upon  their  face  the  words  "  consoli- 
dation bonds,  certificates  of  stock "  equal  in 
amount  to  fifty  per  cent  of  the  face  value  of  the 
bonds  and  stocks  surrendered.  The  new  bonds 
were  to  be  dated  Jan.  1,  1874;  were  to  bear 
interest  at  six  per  cent ;  and  to  be  payable  twenty 
years  from  the  date  of  the  passage  of  the  act. 

1  See  Financial  Chronicle  for  Nov.  23,  1872. 

2  See  Financial  Chronicle  for  July  12,  1873. 
«  Laws  of  South  Carolina  for  1873-74,  p.  518. 


88  REPUDIATION   OF  STATE  DEBTS. 

The  act  further  provided  that  the  bonds  should 
bear  upon  their  face  the  statement  that  the  pay- 
ment of  the  interest  and  the  redemption  of  the 
principal  are  secured  by  the  levy  of  an  annual  tax 
of  two  mills  on  the  dollar  upon  all  the  taxable 
property  in  the  State.  In  enumerating  the  vari- 
ous outstanding  issues  which  were  exchangeable 
under  this  act,  only  those  conversion  bonds, 
amounting  to  81,577,500,  were  included  which 
were  shown  by  the  treasurer's  register  to  have 
been  exchanged  for  other  bonds.  The  remaining 
$5,905,000  of  these  bonds  were  declared  to  have 
been  put  upon  the  market  without  the  authority 
of  the  law,  and  to  be  null  and  void.  As  an  in- 
ducement to  holders  of  bonds  and  stocks  to  ex- 
change them  according  to  the  terms  of  this  act,  it 
was  provided  that  no  tax  should  ever  be  levied  to 
pay  either  principal  or  interest  of  the  classes  of 
bonds  enumerated  in  the  act  so  long  as  they  re- 
mained in  their  present  form. 

This  act  seemed  to  meet  with  the  approval  of 
most  bondholders.  Funding  operations  proceeded 
under  it  with  reasonable  rapidity,  $7,220,512.65 
having  been  funded  up  to  Oct.  31,  1875.  Doubt- 
less all  the  securities  enumerated  in  tlie  act 
would  have  been  funded  before  that  date  had 
not  the  State  defaulted  in  the  payment  of  interest, 
and  charges  of  illegality  been  brought  against  a 
large  number  of  the  bonds  already  issued.  The 
burden,  even,  of  this  reduced  debt,  added  to  that 


REPUDIATION  IN   THE   CAROLINAS.  89 

of  the  extravagant  expenditures  of  the  State  gov- 
ernment, seemed  greater  than  the  State  was  able 
to  bear.  The  tax  rate  for  1874  was  twelve  mills. ^ 
During  this  year  (1874)  the  South  Carolina  Bank- 
ing and  Trust  Company  failed,^  and  thus  inflicted 
upon  the  State  a  loss  of  8250,000  in  cash.  The 
taxes  which  were  relied  upon  to  pay  the  interest 
on  the  consolidated  bonds  were  paid  largely  in 
bills  which  had  been  made  receivable  for  taxes, 
and  which  could  not  be  used  for  debt-paying 
purposes.^ 

After  the  consolidation  act  had  gone  into  force, 
a  legislative  committee  reported  that  coupons 
which  had  been  clipped  from  bonds  before  their 
sale,  and  which  should  have  been  cancelled,  had 
been  transferred  to  third  parties  and  funded  into 
consolidated  bonds.  Charges  of  illegality  were 
also  brought  against  the  bonds  issued  for  the  relief 
of  the  treasur}^  against  a  portion  of  those  issued 
to  pay  interest  on  the  public  debt,  against  those 
issued  for  the  redemption  of  bills  receivable,  and 
others  which  had  been  authorized  to  be  exchanged 
for  consolidation  bonds,  and  many  of  which  had 
been  so  exchanged.  Another  investigation  was 
demanded  by  the  public,  and  was  provided  for  by 
a  joint  resolution  adopted  by  the  legislature  June 
8,  1877.4 

1  Supplement  of  Financial  Chronicle  for  Aug.  28,  1875. 

2  See  Comptroller's  Report  for  1875;  also  Financial  Chronicle 
for  Sept.  4, 1875. 

3  Financial  Chronicle  for  July  8,  1876. 

4  Laws  of  South  Carolina  for  1877,  p.  318. 


90  BEPUDIATION  OF  STATE  DEBTS. 

In  accordance  with  this  resolution  a  committee 
was  appointed  with  power  to  ascertain  whether 
there  Avere  in  the  State  Treasurer's  office,  on  file 
as  vouchers,  cancelled  bonds,  coupons,  and  certifi- 
cates of  stock  of  the  issues  described  in  the  act  of 
1873,  which  were  issued  in  accordance  with  law, 
and  whether  there  were  any  which  were  unlaw- 
fully or  otherwise  improperly  issued.  The  com- 
mission was  in  session  for  several  months,  and 
after  a  very  careful  investigation  reported  that 
$5,184,062  (representing  12,592,031  of  the  consoli- 
dated bonds)  of  vouchers  which  had  been  issued 
in  accordance  with  law  had  been  found,  and  that 
vouchers  amounting  to  13,608,707  (representing 
$1,804,358.50  of  the  consolidated  bonds)  had  been 
found  which  had  been  illegally  issued.  After  lis- 
tening to  the  report  of  this  commission,  the  legis- 
lature on  March  22,  1878,^  established  a  "  Court 
of  Claims  "  to  examine  into  and  decide  concerning 
the  consolidated  bonds  alleged  to  be  illegal.  A 
number  of  test  cases  were  brought  before  this 
court,  and  subsequently  appealed  to  the  Supreme 
Court  of  the  State,  whose  decision  on  the  contested 
points  was  as  follows :  That  all  bonds  issued  under 
the  act  entitled  '^  An  act  to  reduce  the  volume  of 
the  public  debt,  and  to  provide  for  the  payment 
of  the  same  "  were  valid  obligations  of  the  State 
of  South  Carolina  except  as  follows :  — 

"  1 .  Such  as  were  issued  in  exchange  for  bonds 

1  Laws  of  South  Carolina  for  1877-78,  p.  670. 


REPUDIATION  IN   THE  CAROUNAS.  91 

under  the  act  entitled  '  An  act  to  authorize  a  loan 
for  the  relief  of  the  treasury,'  or  for  the  coupons 
of  such  bonds; 

"2.  Such  as  were  issued  in  exchange  for  the 
second  issue  of  bonds  under  an  act  entitled  '  An 
act  to  authorize  a  State  loan  to  pay  the  interest  on 
the  public  debt,'  or  the  coupons  of  such  bonds  ; 

"  3.  Such  as  were  issued  in  exchange  for  those 
conversion  bonds  which  were  issued  in  exchange  for 
either  of  the  two  classes  of  bonds  last  mentioned."^ 

In  regard  to  the  illegality  of  the  bonds  for  the 
relief  of  the  treasury,  issued  under  authority  of 
the  act  of  Feb.  17,  1869,  the  court  said:  "This 
act  we  regard  as  liable  to  two  constitutional 
objections :  — 

"1.  It  purports  to  create  a  debt  which  was  not 
'for  the  purpose  of  defraying  extraordinary  ex- 
penditures ; '  and 

"  2.  The  debt  therein  sought  to  be  created  is  not 
'  for  some  single  object,'  and  such  object  is  not 
'distinctly  specified  therein.'  .  .  .  Money  borrowed 
for  the  relief  of  the  treasury  might  and  would  be 
applied  to  as  many  different  objects  as  there  were 
demands  upon  the  treasury.  We  think,  therefore, 
that  this  act  clearly  violates  both  the  clauses  of 
tlie  constitution  above  referred  to,^  and  .  .  .  every 

1  12  s.  C.  294. 

2  The  following  is  the  article  of  the  constitution  upon  which 
the  decision  was  based :  — 

Art.  TX.  Sec.  7. — For  the  purpose  of  defraying  extraordinary 
expenditures,  the  State  may  contract  public  debts ;  but  such  debts 


92  BEPUBIATION  OF  STATE  DEBTS. 

bond,  together  with  its  coupons,  issued  under  au- 
thority of  this  act  is  absolutely  void,  even  in  the 
hands  of  a  bona  fide  holder,  because  issued  without 
any  authority  whatever,  and  hence  every  consoli- 
dation bond  resting  upon  such  bonds  or  coupons 
is,  to  the  extent  that  it  does  rest  upon  such  bonds 
or  coupons,  not  a  valid  debt  of  the  State  of  South 
Carolina"  (12  S.  C.  288). 

The  ground  upon  which  the  second  issue  of 
bonds  for  the  payment  of  interest  on  the  public 
debt  was  declared  illegal  was  that  no  such  issue 
was  authorized  by  the  act.  It  was  held  that  the 
Governor  might  have  issued  bonds  sufficient  to 
yield  fl,000,000  in  cash,  but  that  he  had  no 
authority  to  make  a  second  issue  of  a  new  order 
of  bonds.^  This  decision  rendered  1197,000  of 
bonds  invalid. 

At  the  session  of  the  legislature  succeeding  the 
rendition  of  these  decisions,  a  special  commis- 
sioner 2  was  appointed  for  the  purpose  of  determin- 


shall  be  authorized  by  law  for  some  single  object  to  be  distinctly- 
specified  therein ;  and  no  such  law  shall  take  effect  until  it  shall 
have  been  passed  by  the  vote  of  two-thirds  of  the  members  of 
each  branch  of  the  General  Assembly,  to  be  recorded  by  yeas  and 
nays  on  the  journals  of  each  house  respectively ;  and  every  such 
law  shall  levy  a  tax  annually  suflBcient  to  pay  the  annual  interest 
of  such  debt. 

1  This  issue  had  printed  upon  the  face  the  words  "issued  under 
act  approved  Aug.  2G,  18G8,"  while  the  first  issue  had  printed  upon 
the  face  of  each  bond  the  words  "  loans  to  pay  interest  on  the 
public  debt." 

2  Laws  of  South  Carolina  for  1879,  p.  221. 


REPUDIATION  OF   THE   CAROLINAS.  93 

ing  what  consolidation  bonds  were  valid,  and  what 
invalid,  in  accordance  with  the  principles  laid 
down  by  the  court.  This  commissioner  rendered 
a  report  Nov.  26,  1880,  in  which  the  total  in- 
validity of  consolidation  bonds  and  stock  was 
fixed  at  |l,126,762.99.i  At  the  same  time  2  that 
the  appointment  of  the  special  commissioner  was 
authorized,  an  act  was  passed  for  the  final  adjust- 
ment of  the  consolidated  debt.  It  was  entitled 
"  An  act  to  provide  for  the  settlement  of  the  con- 
solidated debt  of  the  State  in  accordance  with  the 
decision  of  the  Supreme  Court  of  South  Caro- 
lina." ^  It  provided  that  every  holder  of  consoli- 
dated bonds  or  stock  or  of  the  interest  coupons  of 
the  same,  due  and  unpaid  before  July  1,  1878, 
reported  by  the  special  commissioner  as  wholly  or 
partially  valid,  might  exchange  the  same  for  new 
consolidated  bonds  bearing  interest  at  six  per  cent, 
and  equal  in  amount  to  the  valid  portion  of  the 
bond,  stocks,  and  coupons  surrendered.  The  act 
also  provided  for  the  funding  of  old  securities 
still  outstanding. 

This  act  constituted  a  final  settlement  of  the 
controversy,  and  reduced  the  debt  to  a  figure  which 
the  State  could  support,  and  which  she  will  doubt- 
less be  ultimately  able  to  pay. 

1  Tenth  Census,  vol.  vii.  p.  578. 

2  Dec.  23,  1879. 

3  Laws  of  South  Carolina  for  1879,  p.  104. 


IV. 


REPUDIATION    IN   GEORGIA,   LOUIS! 
ANA,   AND   ARKANSAS. 


CHAPTER  IV. 

REPUDIATION   IN  GEORGIA,   LOUISIANA,   AND 
ARKANSAS. 

Georgia. 

The  year  1868  marks  the  beginning  of  an  epoch 
in  the  political  and  industrial  history  of  Georgia. 
It  was  the  year  in  which  she  complied  with  the 
requirements  of  the  reconstruction  act,  and  was  re- 
admitted to  the  councils  of  the  nation  on  an 
equality  with  the  other  States  ;  and  it  was  the  year 
in  which  she  entered  vigorously  upon  the  prosecu- 
tion of  a  plan  for  the  revival  of  her  industries, 
and  the  development  of  her  resources  by  a  system 
of  internal  improvements.  Her  industries  —  up  to 
this  time  chiefly  agricultural  —  had  not  .been  con- 
ducive to  large  accumulations  of  wealth,  and  the 
capital  which  had  been  saved  was  greatly  reduced 
by  the  calamities  of  preceding  years.  In  order  to 
secure  the  means  necessary  to  her  new  industrial 
undertakings,  therefore,  she  was  compelled  to 
resort  to  the  capital  of  foreign  countries,  or  of  the 
Northern  States;  and  the  great  problem  of  how 
to  attract  this  in  the  quantities  desired,  early  con- 
fronted her  statesmen  and  politicians.  It  is  not 
surprising  that  the  use  of  the  State's  credit  for 
this    purpose    w^as    contemplated.      The     federal 

97 


98  REPUDIATION  OF  STATE  DEBTS 

government  and  nearly  every  State  of  the  Union 
were  subsidizing  railroads;  and  the  traditions  of 
the  South  suggested  the  use  of  the  credit  of  the 
State  for  purposes  for  which  the  capital  of  private 
individuals  was  inadequate.  Moreover,  the  State 
had  herself  adopted  this  policy  in  1836,  when  she 
passed  an  act  providing  for  the  construction  of 
the  Western  and  Atlantic  Railroad;  also,  in  1856, 
when  she  invested  $1,000,000  in  the  Atlantic  and 
Gulf  Railroad  ;  and  again  a  few  years  later,  when 
she  indorsed  the  bonds  of  several  roads. 

The  framers  of  the  constitution  of  1868,  foresee- 
ing the  needs  and  very  likely  the  policy  of  the 
State,  prescribed  the  conditions  under  which  pub- 
lic aid  could  be  granted  to  corporations.  Article 
III.  Section  6,  paragraph  5,  reads  as  follows :  "  The 
General  Assembly  shall  pass  no  law  making  the 
State  a  stockholder  in  any  corporate  company ; 
nor  shall  ^  the  credit  of  the  State  be  granted  or 
loaned  to  aid  any  company  without  a  provision 
that  the  whole  property  of  the  company  shall  be 
bound  for  the  security  of  the  State,  prior  to  any 
other  debt  or  lien,  except  to  laborers  ;  nor  to  any 
company  in  which  there  is  not  an  equal  amount 
invested  by  private  persons ;  nor  for  any  other 
object  than  a  work  of  public  improvement." 

The  legislatures  of  1868,  '  69,  and  '  70  satisfied 
the  most  ardent  advocates  of  the  promotion  of  pub- 
lic improvement  by  State  aid.  According  to  the 
report  of  the   State  Treasurer  for  1871,  aid  was 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.  99 

granted  during  these  years  to  over  thirty  railroads, 
in  the  form  of  bonds  issued  or  indorsed,  aggregat- 
ing about  $8,000,000  in  face  value.^  Among  these 
issues  Avere  the  bonds  afterwards  repudiated. 

The  government  of  the  State  during  these  years 
was  under  the  control  of  the  "carpet  baggers," 
and,  in  consequence,  was  suspected  by  the  ortho- 
dox democrats  of  dishonesty,  extravagance,  and 
corruption  in  most  of  its  acts.  Rumors  were  cur- 
rent to  the  effect  that  gigantic  frauds  had  been 
committed  in  the  issue  and  indorsement  of  the 
bonds  in  aid  of  railroads,  and  investigation  proved 
that  they  had  some  basis,  at  least,  in  fact.  Governor 
Bullock,  against  whom  attacks  were  chiefly  directed, 
found  political  life  more  and  more  intolerable,  and 
finally,  on  Oct.  30,  1871,  resigned,  and,  it  was 
alleged,  fled  the  State  for  safety.  He  strenuously 
denied  this  allegation,  but  could  not  prevent  the 
people  from  interpreting  his  resignation  as  a  con- 
fession of  guilt. 

The  State  legislators  of  1871  were  animated  by 
a  spirit  of  criticism  and  reform,  and  were  backed 
by  a  strong  public  opinion.  Under  an  act  entitled 
"  An  act  to  protect  the  people  of  the  State  of  Geor- 
gia against  illegal  and  fraudulent  issues  of  bonds 
and  securities,  and  for  other  purposes  connected 
with  the  same,"  ^  a  committee  was  appointed  for 

1  The  total  amount  of  bonds  authorized  was  about  $30,000,000. 
—  Financial  Chronicle  for  March  25,  1871. 

For  a  list  of  the  roads  aided,  and  the  amount  of  aid  per  mile 
authorized  in  each  case,  see  Tenth  Census,  vol.  vii.  p.  583. 

2  Georgia  Laws  for  1871-72,  p.  14. 


100  REPUDIATION   OF  STATE  DEBTS 

the  purpose  of  ascertaining  the  amount  and  the 
history  of  the  bond  issues  of  the  State.  The  report 
of  this  committee  led  to  the  appointment  of  four 
others  for  the  more  minute  investigation  of  the 
subject.  Their  reports  revealed  a  number  of  irregu- 
larities which  were  deemed  bj  the  legislature  of 
1872  to  be  serious  enough  to  justify  repudiation. ^ 
These  concerned  (1)  the  indorsement  of  the  bonds 
of  the  Bainbridge,  Cuthbert,  and  -  Columbus,  the 
Cartersville  and  Van  Wirt,  the  Cherokee  Valley, 
and  the  Brunswick  and  Albany  Railroads  ;  (2)  the 
State  gold  bonds  issued  under  an  act  of  Oct. 
17, 1870,  in  aid  of  the  Brunswick  and  Albany  ;  (3) 
the  currency  bonds  issued  under  an  act  of  Aug. 
27,  1870  ;  and  (4)  the  quarterly  gold  bonds  issued 
under  an  act  of  Sept.  15,  1870. 

The  act  in  aid  of  the  first-mentioned  road  was 
passed  on  March  18,  1869,^  and  provided  that  the 
State's  indorsement  might  be  placed  upon  the  first 
mortgage  bonds  of  the  road  on  the  same  terms  as 
those  granted  the  Air  Line  Railroad  Company  ; 
namely,  after  twenty  miles  of  road  had  be  encom- 
pleted.  The  investigation  showed,  according  to 
the  report  of  the  committee,  that  before  a  foot  of 
the  road  had  been  built  Governor  Bullock  indorsed 
tlie  bonds,^  and  in  a  letter  to  the  State  Secretary 
directed  him  to  complete  the  indorsement  by  his 

1  Georgia  Laws  for  1872,  pp.  5  and  8. 

2  Ibid,  1869,  p.  59. 

8  Governor  Bullock  made  this  indorsement  in  New  York  while 
on  his  way  to  California. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    101 

signature  as  soon  as  the  twenty  miles  were  com- 
pleted ;  and  that  upon  the  strength  of  this  indorse- 
ment and  letter,  the  bonds  were  negotiated.  The 
road  was  never  built,  and  the  bonds,  though  doubt- 
less in  many  cases  in  the  hands  of  innocent  hold- 
ers, represented  no  advantage  whatever  to  the 
State,  and  her  first  mortgage  lien  upon  property 
which  had  no  existence  furnished  her,  of  course,  no 
security  whatever.  In  view  of  these  facts  the 
legislature  declared  the  State's  indorsement  of 
these  bonds  to  be  null  and  void,  and  forbade  their 
payment.  The  bonds  thus  repudiated  amounted 
to  1600,000. 

The  Cartersville  and  Van  Wirt  Railroad  Com- 
pany was  authorized  by  the  act  of  March  12,  1869, 
to  present  to  the  Governor  for  indorsement  bonds 
not  to  exceed  in  the  aggregate  812,500  per  mile  of 
the  road  when  completed.  Bonds  were  presented 
and  indorsed  to  the  amount  of  1275,000.  After 
the  investigation  it  was  claimed  that  the  State's 
indorsement  had  been  put  upon  the  bonds  before 
an  equal  amount  had  been  invested  in  the  road  by 
private  parties,  and  also  before  a  sufficient  amount 
of  road  had  been  completed,  and  that  the  constitu- 
tion having  thus  been  violated,  the  State  was  not 
bound  in  any  way  to  guarantee  the  payment  of  the 
interest  or  principal  of  the  bonds .^ 

1  The  evidence  upon  which  the  State  chiefly  relied  in  proving 
her  case  was  brought  out  in  the  case  of  Henry  Clews  &  Co.  v.  the 
Cartersville  and  Van  Wirt  Railroad,  in  which  case  the  facts  were 
affirmed  by  "  Pat "  Calhoun,  counsel  for  the  State,  but  were  denied 
by  Hon.  U.  S-  Hammond. 


102  REPUDIATION   OF  STATE  DEBTS 

The  Cherokee  Railroad  was  the  Carters ville  and 
Van  Wirt  under  a  new  name.  Finding  itself  in 
need  of  money  with  which  to  complete  the  road, 
the  company  applied  to  the  legislature,  even  though 
the  State  had  indorsed  all  the  bonds  for  the  Car- 
tersville  and  Van  Wirt  that  the  act  authorized.  The 
legislature  evidently  regarded  the  Cherokee  and 
the  Cartersville  and  Van  Wirt  as  different  roads, 
and  granted  the  aid  asked  for.  $300,000  of  bonds 
were  indorsed,  but  the  indorsement  was  declared 
illegal,  and  hence  null  and  void,  by  the  legislature 
of  1872. 

The  Brunswick  and  Albany  was  an  old  road 
which  the  Confederate  government  had  confiscated 
during  the  war.  After  the  return  of  peace  it  was 
sold  at  auction,  and  the  company  was  reorganized 
under  a  new  charter.  The  road  having  suffered 
considerable  damage  during  the  war,  and  the  Con- 
federate government  having  guaranteed  protection 
to  all  private  property  in  the  State,  the  company 
claimed  that  the  legislature  was  under  obligations 
to  make  good  the  damage.  On  the  strength  of  this 
argument  the  bonds  of  the  road  were  indorsed  to 
the  amount  of  $3,300,000,  and  $1,800,000  of  State 
bonds  were  issued  in  its  favor.  The  legislature  of 
1872  did  not  agree  with  its  predecessor,  and 
declared  that  there  was  no  authority  in  the  laws 
for  granting  aid  under  such  circumstances,  and 
that  the  indorsement  was,  therefore,  null  and 
void. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    103 

The  currency  and  gold  bonds  authorized-by  the 
acts  of  Aug.  27  and  Sept.  15,  1870,  were  issued 
for  the  purpose  of  redeeming  overdue  bonds  and 
coupons,  and  those  which  might  fall  due  in  the 
immediate  future,  and  for  such  other  purposes  as 
the  legislature  might  direct.  Of  the  former  the 
legislature  declared  null  and  void  $2,000,000,  and 
of  the  latter,  1102,000 ;  namely,  those  held  by 
Henry  Clews  &  Co.  of  New  York.  The  chief  rea- 
son assigned  for  this  repudiation  was  the  alleged 
fact  that  these  bonds  had  been  pledged  as  security 
for  loans  without  .the  authority  of  law. 

Investigations  similar  to  the  above  Avere  resumed 
by  the  legislature  of  1875,  and  a  new  batch  of  acts  of 
repudiation  Avas  passed.  The  bonds  of  the  Macon 
and  Brunswick  Railroad  were  the  first  to  suffer. 
The  legislature  of  1872  had  declared  the  State's  in- 
dorsement on  these  bonds  to  be  valid  and  binding, 
but  in  1875  the  Governor  discovered  that  with  regard 
to  a  portion  of  them  it  was  illegal.  His  discovery 
was  doubtless  aided  by  the  fact  that  the  road  had 
defaulted  on  the  interest  which  fell  due  on  July  1, 
1873.  At  that  time  the  State  recognized  the  obli- 
gation of  her  indorsement  by  foreclosing  her  mort- 
gages and  taking  possession  of  the  property  of  the 
road.  In  his  message  to  the  legislature  of  1875  ^ 
the  Governor  stated  that  the  bonds  in  question 
had  been  indorsed  under  authority  of   two  acts, 

1  See  Senate  Journal  of  Georgia  for  the  session  commencing 
Jan.  13,  1875,  p.  16. 


104  REPUDIATION   OF  STATE  DEBTS 

one  passed  in  1866  and  the  other  in  1870.  The 
latter  act^  authorized  the  indorsement  of  bonds  to 
the  extent  of  $3,000  per  mile,  and  was  intended  as  a 
supplement  to  the  preceding  one,  the  company  hav- 
ing claimed  that  the  road  had  cost  them  more  than 
they  had  expected.  It  was  claimed  by  the  Gov- 
ernor that  this  second  indorsement  was  unconstitu- 
tional, because  the  security  of  the  State  was  of 
necessity  a  second  mortgage,  that  of  the  first  in- 
dorsement having  the  precedence.  The  legislature 
agreed  with  the  Governor,  and  repudiated  the  State's 
obligation  on  the  bonds  of  1870,.  the  aggregate  face 
value  of  which  was  1600,000.2  An  act  passed 
Feb.  27  of  the  same  year  declared  null  and 
void  the  State's  indorsement  on  the  bonds  of  the 
Alabama  and  Chattanooga  Railroad.^  The  reason 
for  this  was  the  same  as  that  assigned  in  the  case 
just  mentioned ;  namely,  that  the  indorsement  was 
placed  on  second  mortgage  bonds,  and  was,  there- 
fore, forbidden  by  the  constitution.  It  was  declared 
that  the  bonds  on  their  face  expressly  recognized  the 
existence  of  a  prior  and  first  mortgage  lien  on  the 
company's  property.  This  same  legislature  *  passed 
an  act  on  March  2,  declaring  that  divers  bonds 
then  in  circulation  had  been  paid,  and  then  ille- 
gally and  fraudulently  reissued  and  negotiated,  and 
requiring  the  registration  of  such  bonds  by  the 
treasury.     It  was  enacted  that  all  bonds  not  so 

1  Georgia  Laws  for  1870,  p.  336.  «  Ibid.,  1877,  p.  11. 

8  Ibid.,  1875,  p.  13.  4  ibia.^  p.  12. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.     105 

registered  before  Aug.  1,  1875,  should  be  deemed 
illegal  and  not  binding  on  the  State.  It  was  further 
enacted  that  previous  to  the  registration  the  bond- 
holder must  establish  "  continuous  ownership  for 
the  last  five  years  by  the  affidavit  of  each  bona  fide 
holder  through  whose  hands  they  shall  have  passed, 
showing  from  whom  the  bonds  were  bought,  and  to 
whom  they  were  sold,  giving  number  of  bond  pre- 
sented, date  of  issue,  etc." 

The  legislature  of  1876  ^  put  upon  the  list  of 
repudiated  bonds  still  another  issue  dating  back 
to  an  earlier  period  than  any  of  the  preceding  ones. 
$375,000  of  bonds  had  been  authorized  by  an  act 
of  Feb.  17,  1854,  to  be  exchanged  for  outstand- 
ing bonds  of  the  Central  Bank.  It  was  claimed 
by  this  legislature  that  on  account  of  a  disagree- 
ment between  the  holders  of  the  bonds  of  this  bank 
and  the  Governor,  the  exchange  was  never  made, 
but  that  in  November,  1861,  the  State  bonds  in- 
tended for  this  purpose  were  taken  from  the  trea- 
sury and  negotiated.  An  act  was  accordingly 
passed  on  Feb.  25  declaring  these  null  and 
void. 

The  work  of  repudiation  accomplished  by  these 
various  acts  was  secured  for  all  time,  first,  by  a 
constitutional  amendment,  and  then  by  a  new  con- 
stitution. The  amendment  adopted  by  the  legisla- 
tures of  1875  and  1877,  and  ratified  by  the  people 
in    May,   1877,   reads    as   follows :    "  Neither   the 

1  Georgia  Laws  for  1876,  p.  9. 


106  REPUDIATION  OF  STATE  DEBTS 

General  Assembly  nor  any  other  authority  or  offi- 
cer of  this  State  shall  ever  have  power  to  pay  or 
recognize  as  legal,  or  in  any  sense  valid  or  binding 
upon  the  State,  any  direct  bonds,  gold  bonds,  or 
currency  bonds,  or  any  other  bonds,  guarantees, 
or  indorsements  heretofore  declared  to  be  illegal, 
fraudulent,  or  void  by  act  or  resolution  of  the  legis- 
lature of  the  State,  or  that  may  be  declared  illegal, 
fraudulent,  or  void  by  act  or  resolution  of  the 
legislature  originating  this  amendment ;  viz.,  the 
State  gold  bonds  issued  under  the  act  of  Oct. 
17, 1870,  in  aid  of  the  Brunswick  and  Albany  Rail- 
road Company ;  the  currency  bonds  issued  under 
the  act  of  Aug.  27,  1870  ;  the  quarterly  gold  bonds 
issued  under  the  act  of  Sept.  15,  1870,  which  are 
enumerated  in  the  act  of  Aug.  23,  1872;  the  in- 
dorsement of  the  State  on  the  bonds  of  the  Bruns- 
wick and  Albany  Railroad  Company,  made  under 
the  act  of  March  18,  1869  ;  the  indorsement  of  the 
State  on  the  bonds  of  the  Cartersville  and  Van 
Wirt  Railroad  Company,  and  of  the  Clierokee  Rail- 
road Company ;  the  indorsement  of  the  State  upon 
the  bonds  of  the  Bainbridge,  Cuthbert,  and  Colum- 
bus Railroad  Company,  and  all  other  bonds,  guaran- 
tees, or  indorsements  declared  illegal,  fraudulent, 
or  void  as  herein  provided." 

In  the  new  constitution,  ratified  by  the  people 
Dec.  5,  1877,  Article.  VII.  Section  9,  we  find 
these  words  confirming  the  above  amendment,  and 
forbidding  any  future  repeal  of   the  repudiation 


IN  GEORGIA,  LOUISIANA,   AND  ABKANSAS.    107 

acts :  "  The  General  Assembly  shall  have  no  au- 
thority to  appropriate  money,  either  directly  or  in- 
directly, to  pay  the  whole  or  any  part  of  the 
principal  or  interest  of  the  bonds  or  other  obliga- 
tions which  have  been  pronounced  illegal,  null,  and 
void  by  the  General  Assembly,  and  the  constitu- 
tional amendments  ratified  by  the  people  on  the 
first  day  of  May,  1877." 

Louisiana, 

Before  the  Civil  War  the  State  of  Louisiana  had 
contracted  and  partially  paid  a  very  large  debt. 
A  report  of  the  finance  committee  of  the  House  of 
Representatives  of  the  State,  presented  March  11, 
1861,  shows  that  a  debt  of  $23,309,246.43  in  1840 
had  been  reduced  by  1861  to  110,099,074.32.  This 
debt  consisted  of  liabilities  for  banks  which  the 
State  had  assisted,  and  Avhicli  had  been  placed  in 
liquidation ;  of  bonds  issued  in  aid  of  railroads,  for 
the  construction  of  levees,  for  seminary  and  school 
funds,  and  for  a  charity  hospital ;  and  of  bonds  to 
the  credit  of  various  trust  funds ;  and  of  bonds 
issued  for  the  aid  of  the  city  of  New  Orleans.  Be- 
tween 1861  and  1865  the  debt  was  slightly  increased 
for  purposes  not  connected  with  the  Civil  War,  the 
auditor's  report  for  the  year  ending  Dec.  31,  1865, 
placing  it  at  111,182,377.14. 

During  the  next  five  years  this  debt  was  more 
than  doubled,  and  laws  were  passed  whose  execu- 


108  REPUDIATION  OF  STATE  DEBTS 

tion  subsequently  more  than  trebled  it.  Under 
authority  of  acts  passed  in  1866,i  bonds  to  the 
amount  of  11,000,000  were  issued  for  the  purpose 
of  constructing  levees,  and  others  aggregating 
1997,500  were  issued  for  the  purpose  of  paying 
overdue  bonds  and  coupons.  In  the  following 
year  $4,000,000  ^  more  of  bonds  were  issued  for 
levees,  and  in  1869  and  in  1870  3  nearly  17,000,000 
more  were  issued  for  the  same  purpose,  for  the 
State  penitentiary,  and  in  aid  of  the  Mississippi 
and  Mexican  Gulf  Ship  Canal  Company.  The 
total  State  debt  at  the  close  of  the  fiscal  year 
ending  Nov.  30,  1870,  was  122,589,628.41.4 

The  legislature  of  1870  ^  was  exceedingly  prodi- 
gal of  the  State's  credit.  It  authorized  the  issue 
of  bonds  to  a  number  of  railroad,  canal,  and  navi- 
gation companies  on  conditions  which  made  pos- 
sible an  enoimous  increase  of  the  State's  already 
heavy  liabilities,  and  that,  too,  in  face  of  the  fact 
that  the  expenditures  of  the  State  for  that  year 
exceeded  its  net  income  by  $1,296,723.29.6  This 
deficit  was  more  than  covered  by  the  balance  in 
the  State  treasury  at  the  beginning  of  the  year, 
and  by  the  delinquent  taxes  of  previous  years 
collected  during  the  period;  but  it  nevertheless 

1  Laws  of  Louisiana  for  1866,  p.  6. 

2  Ibid.,  18(57,  p.  213. 

3  Ibid.,  1870,  p.  63. 

4  See  Financial  Chronicle  for  March  18, 1871. 
«  Laws  of  Louisiana  for  1870,  pp.  7,  21,  60, 174. 
6  See  Financial  Chronicle  for  March  18,  1871. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    109 

indicated,  in  connection  with  the  fact  that  the  tax 
rate  for  State  purposes  then  amounted  to  fourteen 
and  one-half  mills, ^  that  the  State  was  in  no  con- 
dition to  bear  a  heavier  burden  of  indebtedness. 
These  acts  were  also  passed  ^with  full  knowledge 
of  an  amendment  to  the  constitution,  adopted 
Dec.  15,  1870,  limiting  the  debt  of  the  State  to 
$25,000,000.  The  legislature  of  1871  contracted 
a  large  number  of  miscellaneous  debts,  and  author- 
ized the  issue  of  bonds  to  the  amount  of  $2,500,000 
to  the  New  Orleans,  Mobile,  and  Texas  Railroad 
Company.  These  acts,  together  with  bonds  loaned 
to  banks  and  those  issued  under  authority  of  acts 
passed  prior  to  1871  ($11,489,000),  made  the  total 
liabilities  of  the  State  $41,733,752.2 

This  rapidly  increasing  debt  became  the  cause 
of  much  anxiety  and  discontent  throughout  the 
State,  to  say  nothing  of  distress.  In  April,  1871, 
a  number  of  property  owners  and  taxpayei-s  in  the 
city  of  New  Orleans  published  a  proclamation  to 
investors  and  the  public  generally,  declaring  it 
to  be  their  belief  that  the  last  legislature  had  ex- 
ceeded its  powers,  and  that  all  the  debts  contracted 
in  excess  of  $25,000,000,  were  unconstitutional  and 
therefore  void. 

The  taxes  had  increased  steadily  from  year  to 
year.  In  1872  in  the  city  of  New  Orleans  they 
amounted  to  fifty-one  and  one-half  mills  on  the 

1  See  Financial  Chronicle  for  March  18,  1871. 

2  See  Tenth  Census,  vol.  vii.  p.  598. 


110  REPUDIATION   OF  STATE  DEBTS 

dollar,  twenty-one  and  one-half  mills  of  which  were 
devoted  to  State  purposes.^  The  amount  collected 
throughout  the  State  in  1868  was  11,266,006 ;  in 
1869,  12,392,809;  in  1870,  $3,082,533;  and  in 
1871,  #3,658,879.2  Besides  this  there  were  de- 
linquencies amounting  to  several  millions  of  dol- 
lars. To  add  to  this  discontent  a  government 
came  into  power  in  1872  which  was  declared  to  be 
a  usurpation,  and  which  a  committee  of  Congress, 
after  thorough  investigation,  subsequently  decided 
had  not  been  the  choice  of  the  people.^  This  gov- 
ernment, however,  was  supported  by  the  military 
arm  of  the  nation,  and  had  to  be  endured. 

The  first  means  of  relief  employed  by  the  people 
was  an  appeal  to  the  courts.  Injunctions  restrain- 
ing the  payment  of  coupons  from  those  bonds 
thought  to  be  illegal  were  sought  and  obtained, 
and  a  decision  of  the  court  was  given  to  the  effect 
that  bonds  issued  under  acts  which  had  been  passed 
since  the  adoption  of  the  amendment  to  the  consti- 
tution limiting  the  debt  to  $25,000,000  were  un- 
constitutional and  void ;  but  that  bonds  issued  since 
that  date,  but  under  authority  of  acts  passed  before 
it,  were  binding  upon  the  State.* 

1  Governor  Kellogg,  in  his  message  to  the  legislature  of  1875, 
stated  that  in  some  parishes  the  taxes  had  reached  seventy  mills 
on  the  dollar. 

2  See  Financial  Chronicle  for  May  24,  1879. 

8  See  House  Misc.  Doc.  No.  211,  Forty-second  Congress,  2d 
session. 

*  See  State  ex  rel.  Saloman  &  Simpson  v.  Graham,  Auditor, 
23  La.  402 :  also  28  La.  249. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    Ill 

Previous  to  the  legislative  session  of  1874  the 
Governor  appointed  a  citizens'  committee  of  seven 
persons  to  investigate  the  State  debt,  and  in  his 
message  delivered  to  the  legislature  in  January, 
1874,  he  stated  their  conclusions  in  substance  as 
follows  :  — 

1.  That  at  the  time  of  the  adoption  of  the  con- 
stitutional amendment  limiting  the  State  debt  to 
$25,000,000,  the  obligations  of  the  State,  including 
the  then  existing  contingent  liabilities,  amounted 
to  upwards  of  142,000,000. 

2.  That  liabilities  created  since  the  adoption  of 
the  amendment,  amounting  to  $8,087,500,  were 
null  and  void. 

3.  That  contingent  liabilities  amounting  to  813,- 
003,000  created  prior  to  the  amendment  have  all, 
or  nearly  all,  lapsed  or  become  forfeitable  by 
neglect,  and  may  be  declared  null  and  void. 

4.  That  the  issue  of  $2,500,000  of  bonds  in  pay- 
ment of  the  subscription  to  the  stock  of  the  New 
Orleans,  Mobile,  and  Texas  Railroad  Company, 
under  the  act  of  April  20,  1871,  was  in  violation  of 
the  constitutional  amendment  and,  therefore,  null 
and  void. 

5.  That  all  illegal  debts  should  be  repudiated, 
and  that  the  remainder  should  be  compromised  on 
a  basis  which  will  reduce  it  in  amount  to  a  sum 
not  exceeding  $12,000,000.^ 

1  Financial  Chronicle  for  Jan.  17,  1874;  also  message  of  Gov- 
ernor William  P,  Kellogg,  Documents  of  the  Legislature  of  1874, 
p.  3. 


112  REPUDIATION  OF  STATE  DEBTS 

The  legislature  which  met  in  this  year  came 
from  the  people  impressed  with  the  necessity  of 
a  reduction  of  the  debt  and  of  a  diminution  of 
the  burden  of  taxation  ;  but  they  were  not  prepared 
to  accept  the  recommendations  of  the  committee 
whose  report  the  Governor  presented  in  his  mes- 
sage. The  result  of  their  deliberations  was  the 
passage  of  an  act^  on  Jan.  24,  1874,  which  pro- 
vided for  the  funding  of  the  outstanding  obliga- 
tions of  the  State,  including  the  floating  debt,- into 
new  bonds  payable  in  forty  years  from  Jan.  24, 
1874,  and  bearing  seven  per  cent  interest.  The 
exchange  was  to  be  made  by  a  board  of  liquidation, 
consisting  of  the  Governor,  Lieutenant-Governor, 
Auditor,  Treasurer,  Secretary  of  State,  and  Speaker 
of  the  House  of  Representatives,  at  the  rate  of 
sixty  cents  in  new  bonds,  —  called  consolidated 
bonds, —  for  one  dollar  in  outstanding  bonds  and 
all  valid  warrants.  The  consolidated  bonds  to  be 
thus  created  were  to  be  limited  in  amount  to  $15,- 
000,000,  and  it  was  provided  that  prior  to  the  year 
1914  the  entire  State  debt  should  never  be  increased, 
either  directly  or  indirectly,  beyond  that  amount. 

The  board  of  liquidation  found  the  task  of  exe- 
cuting this  act  no  easy  matter.  The  bondholders 
of  New  York  protested  against  it,  citing  in  proof 
of  the  ability  of  the  State  to  pay  her  debts  in  full 
the  glowing  statements  of  the  Governor,  relative  to 
her  financial  condition,^  while  the  London  bond- 

1  Laws  of  Louisiana  for  1874,  p.  39. 

2  See  Financial  Chronicle  for  Feb.  7, 1874. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    118 

holders  refused  to  accept  the  terms  offered  in  the 
act,  and  declared  it  to  be  a  proposition  to  confiscate 
forty  per  cent  of  the  capital  and  interest  of  their 
bonds.i  The  board  had,  besides,  the  difficult  task 
of  deciding  what  were  valid  outstanding  bonds  and 
warrants.  Scarcely  had  it  entered  upon  its  duties 
before  it  was  enjoined  by  the  courts,  upon  the  ap- 
plication of  various  citizens,  from  funding  those 
bonds  concerning  whose  constitutionality  and  le- 
gality the  public  were  suspicious.  The  legislature 
of  1875  heeded  these  suspicions,  and  in  an  act^ 
passed  May  19,  declared  eighteen  issues  of  bonds  to 
be  "  questioned  and  doubtful,"  and  prohibited  the 
board  of  liquidation  from  funding  them  into  con- 
solidation bonds  before  they  had  been  tested  by 
the  courts  and  declared  valid.  Of  these  eighteen, 
ten  were  bonds  issued  in  aid  of  railroads,  three 
were  bonds  issued  for  the  construction  of  levees, 
and  the  remaining  five  were  respectively,  —  the 
issue  of  bonds  for  the  relief  of  the  treasury,  the 
Free  School  Fund  bonds,  those  issued  in  aid  of 
the  Mississippi  and  Mexican  Gulf  Ship  Canal,  those 
issued  in  aid  of  P.  J.  Kennedy,  and  those  which 
were  claimed  to  have  been  issued  for  the  redemp- 
tion of  State  certificates.  The  total  amount  aggre- 
gated nearly  114,000,000. 

In  pursuance  of  the  provisions  of  this  act,  the 
validity  of  most  of  these  issues  was  tested  in  the 

1  See  resolutions  adopted  in  London,  July  29, 1874,  and  quoted 
in  the  Financial  Chronicle  for  Aug.  15,  1874. 

2  See  Laws  of  Louisiana  for  1875,  p.  Ill ;  also  Appendix  No. 


114  REPUDIATION  OF  STATE  DEBTS 

courts.^  The  levee  bonds,  amounting  to  nearly 
$8,000,000,  were  pronounced  valid,  as  were  also  the 
bonds  issued  in  aid  of  the  Mississippi  and  Mexican 
Gulf  Ship  Canal  to  the  amount  of  $124,000.2 
Bonds  to  the  amount  of  $2,500,000  issued  to  the 
Mobile  and  Chattanooga  Railroad  Company  were 
pronounced  unconstitutional  on  the  ground  that 
the  constitutional  limit  of  the  State  debt  had  been 
reached  before  the  passage  of  the  act  which  author- 
ized their  issue.  The  result  of  all  the  litigation 
was  that  the  larger  part  of  the  debt  declared  to  be 
"  questioned  and  doubtful "  was  funded  into  con- 
solidation bonds,  much  to  the  displeasure  of  a  large 
party  of  the  people ;  and  though  the  bonded  debt 
of  the  State  was  reduced  by  the  act  of  1874  to 
about  $12,000,000,  the  people  were  not  satisfied, 
chiefly  because  they  believed  that  a  large  part  of 
the  debt  which  had  been  funded  was  illegal  and 
un  con  sti  tutional . 

Another  cause  of  dissatisfaction  with  this  fund- 
ing act  was  the  high  rate  of  interest  —  seven  per 
cent  —  which  it  authorized  to  be  paid.  It  was 
thought  that  this  was  unjust,  and,  moreover,  more 
than  the  State  could  afford  to  pay.  However  this 
may  be,  it  is  certain  that  the  State  found  herself 
unable  to  pay  the  interest  on  the  consolidated  bonds 
as  it  fell  due.  In  1874  the  treasurer  was  obliged  to 
leave  interest  to  the  amount  of  $66,558.71  unpaid  ; 

1  See  the  following  cases:  27  La.  577;  28  La.  219, 249,  and  393. 

2  See  Financial  Chronicle  for  Nov.  25, 1876. 


IN  GEORGIA,   LOUISIANA,  AND  ARKANSAS.    115 

in  1875  the  unpaid  interest  account  amounted  to 
$63,729.31;  in  1876,  to  $153,458.25;  in  1877,  to 
$114,837.48  ;  and  in  1878,  to  $181,148.52.^  A  ref- 
erence to  the  delinquent  tax  list  of  these  years 
shows  that  the  treasurer's  inability  to  pay  was 
caused  either  by  the  unwillingness  or  the  inability 
of  the  people  to  pay  the  five  and  one-half  mill  tax 
assessed  for  this  purpose.  Of  the  total  amount  of 
this  tax  assessed,  $351,890  remained  uncollected  in 
1874;  $339,890  in  1875 ;  $387,141  in  1876;  $221,- 
883  in  1877  ;  $272,371  in  1878 ;  and  $673,392  in 
1879.2  Had  these  amounts  been  collected  promptly, 
the  treasurer  would  have  had  a  small  surplus  each 
year  which  could  have  been  used  as  a  sinking  fund 
for  the  redemption  of  the  principal  of  the  bonds. 

The  government's  evident  inability  to  meet  its 
interest  obligations,  and  the  general  dissatisfaction 
with  the  funding  act  of  1874,  led  to  the  calling  of 
a  constitutional  convention  in  1879,  which,  after  a 
long  and  stormy  debate  on  the  debt  question,  finally 
adopted  a  "  debt  ordinance  "  reducing  very  greatly 
the  interest  on  the  consolidated  bonds.  This  was 
adopted  by  a  large  majority  of  the  people,  and  thus 
became  a  part  of  the  fundamental  law  of  the  State. 
The  text  of  the  ordinance  is  as  follows  :  — 

Article  1.  Be  it  ordained  by  the  people  of  the 
State  of  Louisiana  in  convention  assembled,  that 
the  interest  to  be  paid  on  the  consolidated  bonds 

1  See  Treasurer's  Reports  for  the  years  mentioned;  also  Finan- 
cial Chronicle  for  Jan.  11,  1879. 

2  See  Financial  Chronicle  for  Sept.  13,  1879. 


116  REPUDIATION   OF  STATE  DEBTS 

of  the  State  of  Louisiana  be  and  is  hereby  fixed 
at  two  per  cent  per  annum  for  five  years  from  the 
first  day  of  January,  1880,  three  per  cent  per  an- 
num for  fifteen  years,  and  four  per  cent  per  annum 
thereafter,  payable  semi-annually ;  and  there  shall 
be  levied  an  annual  tax  sufficient  for  the  full  pay- 
ment of  said  interest,  not  exceeding  three  mills, 
the  limit  of  all  State  tax  being  hereby  fixed  at  six 
mills;  provided  the  holders  of  consolidated  bonds 
may,  at  their  option,  demand  in  exchange  for  the 
bonds  held  by  them  bonds  of  the  denomination  of 
five  dollars,  one  hundred  dollars,  five  hundred  dol- 
lars, one  thousand  dollars,  to  be  issued  at  the  rate 
of  seventy-five  cents  on  the  dollar  of  bonds  held 
and  to  be  surrendered  by  such  holders,  the  said 
new  issue  to  bear  interest  at  the  rate  of  four  per 
cent  per  annum,  payable  semi-annually. 

Akt.  3.  Be  it  further  ordained,  that  the  coupons 
of  said  consolidated  bonds  falling  due  on  the  1st 
of  January,  1880,  be,  and  the  same  is  hereby, 
remitted,  and  any  interest  taxes  collected  to  meet 
said  coupons  are  hereby  transferred  to  defray  the 
expenses  of  the  State  government. 

Unfortunately  this  amendment  did  not  put  an 
end  to  the  controversy.  It  was  destined  to  rage 
for  five  years  more.  Bondholders  who  had  already 
submitted  to  the  scaling  of  their  claims  forty  per 
cent  were  loath  to  endure  another  reduction  of 
twenty-five  per  cent.  Though  they  were  requested 
to  present  their  bonds  to  have  the  new  interest 


IN   GEORGIA,   LOUISIANA,   AND  ABKANSAS.    117 

regulations  stamped  thereon,  or  to  exchange  them 
at  seventy-five  cents  on  the  dollar  for  new  four 
per  cent  bonds,  few  of  them  complied.  The  in- 
terest money  collected  for  the  purpose  of  carrying 
out  the  provisions  of  the  debt  ordinance  accumu- 
lated in  the  treasury,  and  there  was  talk  of  invest- 
ing it  in  United  States  bonds.  Various  attempts 
Avere  made  by  the  bondholders  to  compel  the  pay- 
ment of  the  interest  as  provided  for  in  the  act  of 
1874.  The  treasurer  was  temporarily  enjoined 
from  devoting  the  money  which  had  been  collected 
to  pay  interest  to  the  general  purposes  of  the  State, 
but  the  courts  did  not  sustain  the  injunction.  Vain 
attempts  were  also  made  to  compel  the  payment 
of  the  interest  falling  due  on  Jan.  1,  1880,  which 
the  debt  ordinance  remitted. 

A  unique  attempt  to  compel  the  State  to  pay  her 
obligations  in  full  was  made  by  the  States  of  New 
York  and  New  Hampshire.^  Inasmuch  as  the 
eleventh  amendment  prohibits  individuals  from 
bringing  suits  against  States  in  the  federal  courts, 
these  two  States  attempted  to  give  their  citizen 
bondholders  redress  against  the  repudiating  State 
of  Louisiana  by  taking  their  obligations  upon  them- 
selves, and  suing  for  their  enforcement  in  the 
Supreme  Court  of  the  United  States.  That  tribu- 
nal, however,  decided  that  this  action  was  an  eva- 
sion of  the  eleventh  amendment,  and,  therefore, 
not  permissible.     Several  other  cases,  the  object  of 

1  See  108  U.  S.,  76. 


118  REPUDIATION  OF  STATE  DEBTS 

which  was  to  enforce  the  provisions  of  the  funding 
act  of  1874,  were  brought  before  the  Supreme 
Court  and  decided  in  March,  1883.1  It  was  held 
that  the  debt  ordinance  was  a  violation  of  the  con- 
tract made  with  the  bondholders  in  1874,  but  that 
there  was  no  remedy  provided  for  compelling  the 
State  to  do  wliat  she  had  refused  to  do.  The  fol- 
lowing are  the  words  of  Chief  Justice  Waite: 
"Neither  was  there  when  the  bonds  were  issued, 
nor  is  there  now,  any  statute  or  judicial  decision 
giving  the  bondholders  a  remedy  in  the  State 
courts  or  elsewhere,  either  by  mandamus  or 
injunction  against  the  State  in  its  political  capa- 
city, to  compel  it  to  do  what  it  has  agreed  should 
be  done,  but  what  it  refuses  to  do." 

Baffled  in  all  their  attempts  to  obtain  their  rights 
in  the  courts,  the  bondholders  proposed  to  the  State 
another  compromise.  They  asked  that,  instead  of 
two  per  cent  for  five  years,  three  per  cent  for  fif- 
teen years,  and  four  per  cent  thereafter,  the  State 
give  them  four  per  cent  after  the  first  five  years. 
To  this  proposition  the  legislature  agreed  in  June, 
1882,  by  the  passage  of  an  amendment  ^  to  the 
constitution  providing  that  interest  on  the  consoli- 
dated bonds  be  fixed  at  two  per  cent  for  the  first 
five  years  and  at  four  per  cent  thereafter.  The 
legislature  also  provided  that  in  the  interim,  before 
the  amendment  could  be  voted  upon  by  the  people, 

1  See  108  U.  S.,  76. 

2  Laws  of  Louisiana  for  1882,  p.  96. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.     119 

interest  should  be  paid  on  the  consolidated  bonds 
at  the  rate  of  two  per  cent  per  annum.  In  May, 
1884,  the  people  ratified  this  amendment  by  a  fair 
majority,  and  it  became  the  basis  of  the  final  settle- 
ment. Proposed  by  the  bondholders  themselves, 
they  could  not  but  accept  it.  The  legislature  of 
1884  passed  revenue  bills  and  made  appropriations 
necessary  for  the  payment  of  the  interest  on  this 
basis,  and  thus  provided  for  the  execution  of  the 
new  amendment.^ 

Arkansas. 

Arkansas  entered  the  Union  as  a  State  in  1836 
with  a  population  of  about  fifty  thousand  souls, 
who  possessed  all  told  an  amount  of  wealth  not 
exceeding  $15,000,000.  Her  ambition,  however, 
was  equal  to  that  of  the  most  populous  and  richest 
States,  and  she  was  not  backward  in  undertaking 
enterprises  which  her  limited  financial  resources 
hardly  warranted.  The  scarcity  of  capital  and  the 
example  of  other  States  induced  her  in  1837  and 
1838  to  charter  two  banks,  known  as  the  Bank  of 
the  State  of  Arkansas  and  the  Real  Estate  Bank, 
and  to  secure  for  them  a  capital  fund  by  the  issue 
of  bonds  amounting  to  12,827,000.2  These  banks 
followed  the  course  of  sister  institutions  in  other 

1  Laws  of  Louisiana  for  1884,  p.  62. 

2  Before  the  failure  of  these  banks  the  State  had  issued  bonds 
all  told  to  the  amount  of  more  than  $3,500,000.  —  Tenth  Census, 
vol.  vii.  p.  603. 


120  REPUDIATION   OF  STATE  DEBTS 

States,  and  speedily  became  insolvent,  leaving  the 
payment  of  these  bonds,  with  accumulated  interest, 
as  a  legacy  to  the  State.  Being  scarcely  able,  with 
the  help  of  the  surplus  revenue  which  had  been 
distributed  by  the  federal  government,  to  pa}^  her 
current  expenses,  she  was  obliged  to  allow  the 
interest  on  these  bonds  to  accumulate  from  year  to 
year,  and  thus  to  drift  into  a  slough  of  indebtedness 
from  which  she  subsequently  found  it  extremely 
difficult  to  extricate  herself.  By  1869  this  portion 
of  her  debt  had  increased  by  the  accumulations  of 
interest  to  $4,225,000.1 

In  the  years  immediately  succeeding  the  war, 
the  financial  condition  of  the  State  showed  but 
little,  if  any,  improvement  over  that  of  the  early 
years  of  her  history.  A  large  floating  debt  had 
accumulated,  owing  to  the  insufficiency  of  the 
annual  revenues,  and  a  large  amount  of  State 
scrip  was  issued,  which,  being  receivable  for 
taxes,  was  the  cause  of  great  financial  embarrass- 
ment in  after  years.  The  bonds  issued  in  aid  of 
the  Real  Estate  Bank  became  due  in  1861,  but  of 
course  could  not  then  be  paid,  and  were  allowed  to 
run  on  and  the  interest  to  accumulate.  Those 
issued  in  aid  of  the  State  Bank  fell  due  in  1868. 
In  order  to  meet  these  obligations  the  legislature 
of  1869,  on  April  6,  passed  a  funding  act  ^  which 

1  These  figures  were  taken  from  the  Financial  Chronicle  for 
Oct.  2,  1869.  The  Tenth  Census,  vol.  vii.  p.  603,  puts  the  figure 
of  this  portion  of  the  debt  in  October,  1868,  at  $4,993,503.19. 

2  Acts  of  Arkansas  for  1868-69,  p.  115. 


IN  GEORGIA,   LOUISIANA,  AND  ARKANSAS.    121 

provided  for  the  issue  of  new  bonds  in  exchange 
for  those  then  due  and  their  unpaid  coupons,  one- 
half  to  be  dated  July  1,  1869,  and  the  other  half 
Jan.  1,  1870,  payable  in  thirty  years  with  in- 
terest at  six  per  cent.  By  January,  1873,  new 
bonds  to  the  amount  of  $3,050,000  had  been  issued 
under  authority  of  this  act.^ 

The  same  legislature  passed  an  act  ^  authorizing 
the  loan  of  the  State's  credit  to  railroads.  It  pro- 
vided that  the  railroads  should  pay  the  interest  on 
the  bonds  loaned  them,  and,  in  case  they  defaulted, 
the  State  was  authorized  to  take  possession  of  them 
and,  if  need  be,  to  sell  them  for  her  reimbui-sement. 
Under  authority  of  this  act,  railroad  bonds  were 
issued  to  the  amount  of  15,300,000.3  The  his- 
tory of  these  bonds  is  merely  a  repetition  of  the 
history  of  similar  issues  by  other  States.  All  the 
railroads  aided  defaulted  in  the  payment  of  interest 
in  1873,  and  they  were  temporarily  handed  over  to 
receivers  appointed  at  the  request  of  the  State 
treasurer.  In  May,  1874,  however,  the  legislature 
repealed  the  law  authorizing  the  roads  to  be  put 
into  tlie  hands  of  receivers,  and  they  drifted  back 
into  the  possession  of  their  original  owners,  leaving 
the  State  under  obligations  to  pay  the  interest 
and  principal  of  the  $5,300,000  of  bonds.  Being 
entirely    unable    to    meet    the    increased  interest 

1  See  Tenth  Census,  vol.  vii.  p.  603. 

2  Acts  of  Arkansas  for  186G-()8,  p.  428. 

8  See  statement  of  the  Board  of  Finance  issued  Aug.  4,  1876, 
quoted  in  the  Financial  Chronicle  for  Aug.  19,  1876. 


122  BEPUDIATION  OF  STATE  DEBTS 

charge  which  these  bonds  threw  upon  her,  she 
adopted  the  policy  which  has  been  noted  in  con- 
nection with  the  bank  bonds,  and  allowed  the 
interest  to  accumulate. 

Another  class  of  bonds  must  also  be  noticed 
before  Ave  turn  to  the  repudiation  acts  of  this  State. 
It  embraces  bonds  issued  for  the  construction  of 
levees.  They  amounted  in  principal  to  nearly 
$2,000,000  all  told,  and  were  authorized  at  about 
the  same  time  as  the  railroad  bonds.  The  interest 
on  these  was  also  allowed  to  accumulate,  owing  to 
the  inability  of  the  State  to  pay  it. 

This  heavy  indebtedness,  together  with  delin- 
quency in  the  payment  of  interest,  had  a  most 
depressing  influence  on  every  branch  of  business 
in  the  State,  and  was  a  serious  drawback  to  her 
prosperity.  All  patriotic  citizens  naturally  desired 
a  settlement,  but  how  to  accomplish  this  was  a 
problem  not  easily  solved.  The  State  was  obliged 
to  borrow  money  from  year  to  year  to  meet  cur- 
rent expenses.  Nearly  all  the  taxes  were  paid  in 
State  scrip,  and  this  could  not  be  used  for  the 
payment  of  debts.  It  was  urged  by  the  best  in- 
formed people  of  the  State  that  it  was  useless  to 
attempt  a  compromise  of  the  State's  indebtedness 
before  the  scrip  had  been  redeemed  and  destroyed, 
for  then  only  could  tlie  treasury  be  supplied  with 
funds  for  the  payment  of  interest. 

The  legislature  of  1 874-' 75  was  the  first  one  to 
enter  vigorously  and  in  earnest  upon  the  work  of 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    123 

extricating  the  State  from  her  financial  difficulties. 
It  passed  an  act^  on  Dec.  23,  1875,  authorizing 
an  issue  of  bonds  to  the  amount  of  $2,500,000  for 
the  purpose  of  redeeming  the  floating  indebtedness. 
In  order  to  secure  the  purchasers  of  these  bonds, 
the  State  mortgaged  all  her  unsold  public  lands, 
and  provided  that  the  interest  should  be  paid  out 
of  the  first  moneys  coming  into  the  treasury.  This 
legislature  further  provided  by  act^  for  the  appoint- 
ment of  a  Board  of  Finance  for  the  purpose  of  con- 
sulting bondholders  and  deciding  upon  a  plan  for 
the  settling  of  the  just  debt  of  the  State.  The 
following  legislature,  on  Nov.  16,  1875,  passed  an 
act^  authorizing  this  Board  to  borrow  money  to 
pay  the  expenses  of  the  State  government,  and 
to  pledge  bonds  of  the  State  as  security.  Under 
authority  of  these  acts  the  Board  proceeded  to 
retire  the  State  scrip,  holding  that  this  must  be 
the  first  step  towards  the  settlement  of  the  finances. 
At  this  time  an  annual  tax  of  three  mills  was 
being  collected  for  general  purposes,  another  of 
three  mills  to  pay  interest  on  the  debt,  and  another 
of  two  mills  for  scHool  purposes.  The  total  as- 
sessed valuation  of  the  taxable  property  of  the 
State  being  only  about  180,000,000,  this  rate  did 
not  produce  revenue  enough  either  to  pay  interest 
on  the  debt  contracted  since  1874,  or  to  meet  the 
current  expenses  of  the  State.   The  latter  amounted 

1  Acts  of  Arkansas  for  1874-75,  p.  72. 

2  Ibid.  3  Ibid.,  1875,  p.  14. 


124  REPUDIATION  OF  STATE  DEBTS 

to  about  1300,000  annually,  and  the  former  to 
$248,000.1  The  Board,  therefore,  made  temporary 
loans  — hypothecating  bonds  as  security  —  to  meet 
these  expenses,  and  retired  the  scrip  paid  in  for 
taxes.  In  a  statement  ^  bearing  date  Aug.  4, 18T6, 
the  Board  showed  that  at  the  rate  the  scrip  was 
then  coming  in,  it  would  require  two  and  perhaps 
three  years  to  retire  it,  and  they  expressed  the 
opinion  that  no  plan  for  the  settlement  of  the  debt 
could  be  devised — with  any  assurance  that  it 
could  be  carried  into  execution  —  until  this  had 
been  accomplished.  They  therefore  advised  that 
the  interest  on  the  debt  contracted  previous  to 
1874  be  allowed  to  accumulate  until  such  time  as 
the  income  of  the  State  should  furnish  a  clear  sur- 
plus which  could  be  used  as  a  basis  for  calcula- 
tion of  her  ability  to  pay  interest. 

Before  this  time  arrived,  however,  the  debt 
question  was  settled  in  a  manner  different,  per- 
haps, from  that  which  the  Board  of  Finance  had 
contemplated.  As  early  as  1872  charges  of  ille- 
gality had  been  made  against  the  levee  and  rail- 
road aid  bonds,  and  long  before  that  time  a  certain 
number  of  the  bonds  originally  issued  in  aid  of 
banks,  known  as  the  Holford  bonds,  had  been 
tainted  with  the  suspicion  of  illegality  and  fraud 
in  their  issue.     May  3,  1877,  a  case  was  brought 

1  $188,000  on  the  funding  bonds  authorized  by  the  act  of  Dec. 
23,  1874,  and  $60,000  on  the  ten-year  bonds  known  as  the  war  bonds. 

2  See  Financial  Chroniole  for  Aug.  19, 1876. 


IN  GEORGIA,  LOUISIANA,   AND  ARKANSAS.    125 

before  the  Circuit  Court  at  Little  Rock  which 
turned  upon  the  validity  of  the  railroad  aid  bonds, 
and  the  decision  of  the  court  was  tliat  these  bonds 
were  unconstitutional  and  consequently  null  and 
void.  An  appeal  was  made  to  the  Supreme  Court, 
which,  in  June  of  the  same  year,  confirmed  the 
decision  of  the  lower  court.^  The  levee  bonds 
issued  in  1869  and  1870  met  the  same  fate  in  the 
following  year. 

The  basis  of  the  decision  in  the  case  of  the  rail- 
road aid  bonds  was  the  fact  that  the  election  for 
the  purpose  of  taking  the  sense  of  the  people  on 
the  question  of  lending  the  credit  of  the  State,  as 
provided  in  the  act  authorizing  the  bonds,  was 
held  before  the  act  went  into  force,  and  was,  in 
consequence,  a  nullity.  The  bonds,  therefore, 
issued  under  authority  of  the  act  were  unconstitu- 
tional, since  their  issue  had  not  received  the  "  con- 
sent of  the  people  expressed  at  the  ballot  box," 
as  required  by  Section  6  of  Article  X.  of  the  con- 
stitution. 

The  basis  of  the  decision  in  reference  to  the 
levee  bonds  was  also  a  mere  technicality.  The 
State  constitution  ^  provided  that  every  act  crea- 
ting a  liability  or  making  an  appropriation  should 
be  passed  by  a  majority  of  two-thirds  of  both 
houses  of  the  legislature,  and  that  the  vote  thereon 
should  be  taken  by   yeas  and  nays  and  entered 

1  See  31  Arkansas,  701. 

2  Art.  V.  Sections  12  and  27. 


126  REPUDIATION  OF  STATE  DEBTS 

upon  the  journal.  It  was  shown  that  in  the  cases 
of  the  acts  authorizing  these  bonds  this  last  formal- 
ity had  not  been  complied  with,  and  the  courts 
deemed  this  sufficient  to  establish  their  unconsti- 
tutionality and  consequent  invalidity.^ 

The  so-called  "  Holford  bonds,"  attempts  to 
repudiate  which  had  been  made  at  various  times 
and  were  now  repeated,  have  a  history  extending 
back  to  Sept.  7,  1840.  On  that  date  bonds  to  the 
amount  of  1500,000  were  pledged  by  the  Real 
Estate  Bank  to  the  New  York  Trust  and  Banking 
Company  as  security  for  a  loan.  The  State  ex- 
pected to  receive  thereon  $250,000,  but  it  actually 
received  only  1121,336.39.2  These  same  bonds 
were  subsequently  transferred  by  this  Trust  Com- 
pany to  one  Holford  in  payment  of  a  debt  of 
$300,000.  It  was  claimed  that  the  law  authorizing 
the  issue  of  these  bonds  had  been  violated  by  the 
sale  of  the  bonds  below  par,  and,  moreover,  it  was 
urged  that  fraud  had  attended  every  step  of  their 
history.  These  matters  were  considered,  however, 
previous  to  the  passage  of  the  funding  act  of 
1869,  with  the  result  that  these  bonds  were  in- 
cluded in  its  provisions  and  were  subsequently 
funded.  This,  however,  did  not  prevent  resolu- 
tions ^  being  passed  by  both  houses  of  the  legisla- 


1  See  Financial  Chronicle  for  July  G,  1878 ;  also  Tenth  Census, 
vol.  vii.  p.  603. 

2  See  Tenth  Census,  vol.  vii.  p.  G03. 

8  See  Acts  of  Arkansas  for  1879,  pp.  10  and  48. 


IN  GEORGIA,   LOUISIANA,   AND  ARKANSAS.    127 

ture  in  February,  1879,  favoring  their  repudia- 
tion. 

In  September,  1880,  a  constitutional  amend- 
ment ^  was  submitted  to  the  people  which  repudi- 
ated the  above  three  classes  of  bonds,  but  it  failed 
to  secure  a  majority  of  all  the  votes  cast  at  the 
election,  and  so  did  not  become  a  part  of  the  pub- 
lic law.  The  amendment  really  concerned  only 
the  Holford  bonds,  for  the  question  of  the  validity 
of  the  levee  and  railroad  aid  bonds  had  been  set- 
tled by  the  decisions  of  the  courts  of  which  men- 
tion has  been  made.  The  adverse  vote  on  the 
amendment  really  meant  that  the  people  were  not 
yet  willing  to  repudiate  the  Holford  bonds.  Four 
years  more  of  agitation  were  needed  to  change 
their  views.  A  second  amendment,^  declaring 
that  the  General  Assembly  should  have  no  power 
to  levy  a  tax  or  to  make  an  appropriation  to  pay 
interest  or  principal  of  the  bonds  or  the  claims 
upon  which  they  were  based,  known  as  the  Holford 
bonds,  railroad  aid  bonds,  and  levee  bonds,  was 
submitted  to  them  Sept.  1,  1884,  and  adopted  by  a 
fair  majority. 

The  total  amount  of  indebtedness  of  which  the 
State  was  finally  relieved  by  this  amendment,  in- 
cluding the  accrued  interest,  was  between  twelve 
and  thirteen  millions  of  dollars.  The  remaining 
debt  of  the  State  was  estimated  by  Governor  Barry 

1  See  Acts  of  Arkansas  for  1879,  p.  149. 

2  For  the  amendment,  see  IbicL,  1883,  p.  346. 


128  BEPUBIATION  OF  STATE  DEBTS. 

in  his  message  delivered  in  January,  1885,  at 
$4,869,943,  principal  and  interest.  Subsequent 
legislatures  have  provided  for  the  payment  of 
the  interest  on  this,  and  it  is  highly  probable  that 
the  principal  will  ultimately  be  paid. 


V. 


REPUDIATION    IN    TENNESSEE,    MIN- 
NESOTA, AND  MICHIGAN. 


CHAPTER  V. 

REPUDIATION   IN   TENNESSEE,  MINNESOTA,  AND 
MICHIGAN. 

Tennessee, 
The  State  debt  of  Tennessee  was  created  for  the 
most  part  under  authority  of  a  series  of  acts  which 
provided  that  aid  be  granted  to  companies  engaged 
in  the  construction  of  public  improvements.  The 
most  important  of  these  acts  ^  was  passed  Feb.  11, 
1852,  and  was  entitled  "An  act  to  establish  a 
system  of  internal  improvements  in  this  State." 
It  provided  that  State  bonds  to  the  amount  of 
cB8,000  per  mile  might  be  issued  and  lent  to 
turnpike  and  railroad  companies  under  the  follow- 
ing conditions :  (1)  that  their  roads  should  be 
dredged  and  graded  at  private  expense ;  (2)  that 
the  State  should  be  given  a  first  mortgage  lien  on 
their  property ;  (3)  that  the  companies  aided  should 
pay  the  semi-annual  instalments  of  interest  to  the 
fiscal  agent  of  the  State  fifteen  days  in  advance  of 
the  maturity  of  the  coupons  upon  the  bonds  lent 
them;  and  (4)  that  they  should  pay  annually 
in  State  bonds  a  sinking  fund  equal  to  one  per 
cent  of  the  total  amount  of  their  loans  from  the 

1  Acts  of  Tennessee  for  1851-52,  p.  204  ;  also  Appendix  V. 
131 


132  REPUDIATION   OF  STATE  DEBTS 

State.  The  penalty  fixed  for  tlie  non-payment  of 
the  interest  or  the  sinking  fund  was  sequestration 
through  the  appointment  of  a  receiver  by  the  Gov- 
ernor. By  subsequent  acts  ^  the  amount  to  be  set 
apart  as  a  sinking  fund  was  raised  to  two,  and 
afterwards  to  four  per  cent  of  the  total  amount 
lent;  and  the  penalty  was  changed  so  that  the 
State  had  a  right  to  sell  the  roads  in  case  they  de- 
faulted in  the  payment  of  interest  or  sinking  fund. 
The  act  also  contained  the  following  clause :  — 

"  Section  12. —  Be  it  enacted  that  the  State  of 
Tennessee  expressly  reserves  the  right  to  enact  by 
the  legislature  thereof  hereafter  all  such  laws  as 
may  be  deemed  necessary  to  protect  the  interests 
of  the  State,  and  to  secure  the  State  against  loss  in 
consequence  of  the  issuance  of  bonds  under  the 
provisions  of  this  act ;  but  in  such  manner  as  not 
to  impair  tlie  vested  rights  of  the  stockholders  of 
the  companies." 

Under  authority  of  these  acts,  State  bonds  to 
the  amount  of  827,678,000  ^  were  lent  to  railroad 
companies,  some  being  issued  before  the  war  and 
others  in  the  years  immediately  succeeding  it. 

Besides  this  contingent  indebtedness  there  was, 
before  the  war,  a  State  debt  proper,  a  portion  of 
which  had  been  created  between  1833  and  1838 


1  See  an  act  passed  Feb.  21, 185G.  —  Acts  of  Tennessee  for  1855-56, 
p.  444;  also  an  act  passed  Nov.  23, 18C5.  — Acts  of  Tennessee  for 
1865-66,  p.  11. 

2  Financial  Chronicle  for  Oct.  1, 1870. 


IN    TENNESSEE,    MINNESOTA,   MICHIGAN.     133 

for  the  Union  Bank  and  the  Bank  of  Tennessee, 
between  1848  and  1860  for  tlie  building  of  the 
Capitol,  and  in  1856  for  the  Agricultural  Bureau 
and  the  purchase  of  the  Hermitage.*  The  total 
indebtedness  of  the  State  in  1861  was  about 
$21,000,000  in  round  numbers. 

During  the  next  decade  this  debt  was  at  least 
doubled,  owing  chiefly  to  two  causes ;  viz.,  the 
issuance  of  several  millions  more  of  bonds  to  rail- 
roads, and  the  accumulations  of  interest.  At  least 
one-half  of  the  total  $27,000,000  of  bonds  in  aid 
of  railroads  was  issued  after  the  war,  and  com- 
paratively little  interest  had  been  paid  when  the 
funding  act  of  1873. was  passed.  For  this  latter 
fact  the  civil  war  was  chiefly  but  not  wholly 
responsible.  During  the  years  of  its  continuance, 
of  course,  neither  the  roads  nor  the  State  could 
meet  their  obligations,  and  at  its  close  conditions 
were  unfavorable  to  the  State.  The  Bank  of 
Tennessee  had  succumbed  during  the  period,  and 
its  notes,  which  were  receivable  for  taxes,  seriously 
crippled  the  treasury.  The  taxation  system  of  the 
State,  moreover,  was  very  defective.  The  rate, 
twenty  cents  per  hundred  dollars,  was  much  too 
loAV  for  a  State  so  heavily  burdened  with  debts. 
The  assessments  in  the  different  counties  were 
very  unequal.  The  penalties  for  non-payment  of 
taxes  were  very  inadequate,  and  the  collectors  in 
many   instances  were   irresponsible  men  who  de- 

l  The  old  home  of  President  Jackson. 


134  REPUDIATION  OF  STATE  IjEBTS 

frauded  the  State  out  of  large  amounts.  The 
delinquent  tax  list  at  the  end  of  the  fiscal  year, 
ending  Sept.  30,  1871,  footed  up  fl,283,115.i 

The  State  had  expected  that  the  greater  part  of 
the  annual  interest  charge  would  be  paid  by  tlie 
various  railroad  companies  to  which  she  had  lent 
bonds,  and  upon  the  property  of  which  she  held 
first  mortgage  liens.  But  some  of  these  companies 
had  never  paid  a  cent  of  interest,^  and  others  had 
defaulted  for  large  amounts.  The  State  was  re- 
sponsible for  the  whole  sum,  since  the  bonds  were 
her  own  and  bore  no  mark  of  the  railroad  com- 
panies who  enjoyed  their  use.  In  1865  she  pro- 
vided by  law  ^  for  the  funding  of  the  interest 
Avhich  had  accumulated  up  to  that  time,  and  in 
1868  she  repeated  the  same  act*  for  the  interest 
then  overdue.  Up  to  this  time  she  had  not  seen 
fit  to  make  use  of  her  legal  rights  to  indemnifica- 
tion from  the  defaulting  roads.  The  interests  of 
the  companies,  which  had  scarcely  had  a  chance  to 
recover  from  the  disasters  of  the  war  period,  and 
the  liope  that  they  would  soon  be  able  to  meet  tlieir 
obligations,  deterred  her  from  taking  this  course, 
as  well  as  the  impression  that  there  was  a  better  way 
to  meet  the  difficulty.  Under  authority  of  the  clause 
of  the  act  of  1852,  which  gave  the  State  the  right  to 
make  any  laws  necessary  for  the  protection  of  her 

1  Financial  Chronicle  for  March  18, 1871. 

2  Ibid.,  Oct.  1,1870. 

8  Acts  of  Tennessee  for  1805-66,  p.  10. 
4  Ibid.,  Extra  Session,  1868,  p.  15. 


IN    TENNESSEE,   MINNESOTA,   MICHIGAN.      135 

own  interests,  provided  she  did  not  interfere  with 
the  vested  rights  of  stockholders,  the  legislatures 
of  1869  and  1870  passed  four  acts,  designed  to 
extricate  her  from  financial  difficulties. 

The  first  one,  passed  Feb.  25,  1869,^  provided 
that  railroads  indebted  to  the  State  might  pay 
off  their  obligations  in  State  bonds ;  and,  in  order 
that  they  might  procure  the  funds  needed  for 
this  purpose,  they  were  authorized  to  issue  bonds 
of  their  own  in  amounts  and  in  denominations 
equal  to  the  State  bonds  paid  into  the  treasury. 
The  State,  on  her  part,  agreed  to  transfer  her  first 
mortgage  lien  to  holders  of  these  railroad  bonds. 
On  Jan.  20,  1870,  an  amendment  ^  to  this  act 
was  passed,  which  permitted  the  railroad  companies 
to  fix  the  rate  of  interest  on  their  bonds,  and  which 
extended  their  rights  so  as  to  permit  them  to  pay 
in  any  bonds  of  the  State. 

The  two  other  acts  of  1870  provided  for  the  sale 
of  delinquent  roads.  One  passed  July  1,  author- 
ized the  appointment  of  a  railroad  commission,^ 
and  prescribed  as  its  duty  the  sale  of  the  State's 
interest  in  railroads  to  whose  companies  the  bonds 
of  the  State  had  been  lent  by  the  act  of  Dec. 
7,  1867,  and  former  acts,  and  whose  companies 
had  failed,  or  should  fail  for  two  consecutive  years, 
to   pay  the   interest  that   had  accrued  or  should 

1  Acts  of  Tennessee  for  1868-69,  p.  50. 

2  i7>«(i.,  1869-70,  p.  61. 

8  See  Thompson  &  Steger,  Statutes  of  Tennessee,  1871,  Sec. 
1127  b. 


136  REPUDIATION  OF  STATE  DEBTS 

accrue  upon  the  bonds  lent  them.  The  other 
act  ^  was  passed  Dec.  22,  and  was  occasioned  by 
an  unsuccessful  attempt  of  the  commissioners  to 
sell  certain  of  the  roads  which  had  been  adver- 
tised. It  was  discovered  that  in  case  of  the  sale  of 
the  roads,  a  number  of  legal  technicalities  could  be 
raised  which  would  throw  uncertainty  upon  the 
title  which  the  commissioners  could  convey,  and 
consequently  buyers  held  aloof.  The  commission- 
ers, therefore,  recommended  that  bills  against  the 
delinquent  roads  be  filed  in  the  Chancery  Court  at 
Nashville,  and  that  all  controversies  and  legal 
questions  be  settled  by  that  court.  The  bill  in 
question  embodied  these  recommendations  of  the 
commissioners. 

These  acts  afforded  the  State  much  relief.  The 
solvent  railroad  companies  were  glad  to  exchange 
their  own  bonds  for  those  of  the  State,  which  could 
be  purchased  at  sixty-five  cents  on  the  dollar,  or 
less.  The  commissioners  vigorously  executed  the 
acts  of  July  1  and  Dec.  22,  1870,  and  from 
time  to  time  sold  roads  that  had  defaulted  at  prices 
which,  at  any  rate,  partially  indemnified  the  State. 
By  these  means  the  debt  was  diminished  each  year. 
From  143,052,625.25  in  1870,  it  diminished  to 
$38,539,802.25  in  1871 ;  to  $33,190,802.37  in  1872; 
to  130,632,200.76  in  1873 ;  and  to  $27,920,386.45  in 
1874.2     These  reductions,  however,  did  not  enable 

1  Acts  of  Tennessee  for  1870-71,  p.  25. 

a  These  figures  were  taken  from  the  Financial  Chronicle  for 
May  10, 1874. 


IN  TENNESSEE,  MINNESOTA,  MICHIGAN.      137 

the  State  to  meet  her  financial  obligations.  When 
the  legislature  met  in  1873,  a  large  amount  of 
overdue  and  unpaid  interest  coupons  had  accumu- 
lated, and  some  of  the  bonds  had  fallen  due.  To 
cover  this  deficit  the  old  expedient  of  a  funding 
act^  was  resorted  to.  It  was  passed  March  15, 
1873,  and  provided  that  all  past  due  coupons  and 
bonds  might  be  funded  into  new  bonds  bearing 
interest  at  six  per  cent,  redeemable  after  July  1, 
1884,  and  due  and  payable  July  1,  1914.  It  also 
provided  that  coupons  falling  due  on  and  before 
Jan.  1,  1874,  should  be  funded  at  once,  and 
that  bonds  falling  due  after  that  date  might  also 
be  funded  if  the  legislature  should  so  direct. 
Coupons  on  the  new  bonds  were  to  be  payable  on 
January  and  July  of  each  year,  beginning  July, 
1874. 

This  act  and  the  successful  funding  operations 
which  followed  it  temporarily  revived  the  spirits 
of  the  State  ofiicers,  and  seem  to  have  aroused  the 
hope  that  the  State  might  not  again  fall  into 
arrears.  The  Governor  assured  the  bondholders  of 
his  belief  in  the  ability  of  the  State  to  meet  all 
her  obligations ;  and  as  early  as  February,  1874, 
four  months  before  the  first  coupons  of  the  new 
issue  fell  due,  the  comptroller  announced  that 
coupons  would  be  paid  at  the  treasury  with  rebate 
of  interest,  stating  as  the  reason  for  this  procedure 
that  there  was  a  considerable  sum  of  money  in  the 

1  Acts  of  Tennessee  for  1873,  p.  34. 


138  BEPUDIATION  OF  STATE  DEBTS 

treasury  upon  which  the  State  was  receiving  no 
interest,  and  which  might  as  well  be  used  for 
this  purpose.  These  hopes,  however,  if  enter- 
tained, were  groundless.  The  funding  act  had 
increased  rather  than  diminished  the  annual  inter- 
est charge  by  funding  the  past  due  interest,  and 
the  legislature  failed  adequately  to  provide  for 
that  increase  of  income  without  which  the  State 
was  as  bad  or  worse  off  than  she  had  been  before. 
The  only  measure  looking  to  this  end  was  an  act  ^ 
providing  for  a  more  equitable  assessment  of  prop- 
erty throughout  the  State.  It  was  hoped  that  this 
would  increase  the  revenue  to  some  extent;  but 
a  very  slight  calculation  would  have  shown  that 
without  increasing  the  tax  rate  or  the  basis  of  tax- 
ation, the  increase  could  not  be  sufficient  to  cover 
the  old  deficiency  and  the  new  increase  of  inter- 
est. That  the  true  situation  was  well  understood 
on  Wall  Street  is  evinced  by  the  fact  that  when 
the  legislature  adjourned  Avithout  providing  for 
an  increase  in  the  revenues,  State  bonds  of  Ten- 
nessee at  once  fell  several  points. ^ 

The  financial  record  of  the  State  for  the  next 
four  years  justified  the  gloomiest  apprehensions 
which  could  have  been  felt  in  1873  and  1874. 
The  coupons  which  fell  due  in  July  of  the  latter 
year  were  nearly  but  not  quite  all  paid.  Those 
which  fell  due  in  January,  1875,  could  be  paid 

1  Acts  of  Tennessee  for  1873,  p.  168. 

*  See  Financial  Chronicle  for  April  5,  1873. 


IN  TENNESSEE,   MINNESOTA,   MICHIGAN.     139 

only  by  the  aid  of  a  temporary  loan  of  $300,000. 
When  the  next  instalment  became  due,  July  1, 
1875,  the  treasury  was  nearly  empty.  Besides 
$255,000  of  the  temporary  loan  made  for  the  pay- 
ment of  the  January  coupons  of  1875,  there  were 
outstanding  |425,000  in  warrants.  The  Gov- 
ernor and  Comptroller  attempted  to  make  a  tem- 
porary loan  to  meet  these  obligations,  but  failed. 
Bankers  offered  the  money  at  seven  and  one- 
fourth  per  cent  interest,  on  condition  that  the  State 
deposit  as  collateral  security  for  $600,000,  State 
bonds  to  the  amount  of  $850, 000 ;  but  since  this 
latter  requirement  could  not  be  met,  the  Governor 
was  obliged  to  announce  that  the  July  coupons 
could  not  be  paid. 

At  the  opening  of  the  legislative  session  in 
December,  1875,  the  Governor  delivered  a  very 
doleful  message.  He  stated  that  the  assessment 
returns  for  1874  as  compared  with  those  for  1873 
exhibited  a  decrease  of  $18,556,173,  and  pre- 
dicted that  the  revenue  for  the  coming  year,  even 
estimated  on  the  basis  of  the  valuation  of  1873 
and  at  the  rate  of  four  mills  on  the  dollar,  would 
not  suffice,  unaided  by  arrearages,  to  meet  the 
demands  upon  the  treasury.  The  State  Treasurer 
in  his  report  predicted  a  deficit  for  the  ensuing 
year  of  more  than  $230,000.  The  Governor 
recommended  a  sharp  reduction  of  the  current 
expenses  of  the  government  and  improvements  in 
the  laws  taxing  corporations,   and  the  Treasurer 


140  BEPUDIATION  OF  STATE  DEBTS 

recommended  an  increase  of  the  tax  rate  to  sixty 
cents  per  one  hundred  dollars,  and  stated  it  to  be 
his  belief  that  the  difficulty  of  collecting  taxes 
during  the  year  would  be  very  great. 

Though  evincing  a  desire  to  meet  the  difficulty 
and  to  pay  off  the  debt,  the  legislature  did 
not  deem  it  advisable  to  adopt  the  recommenda- 
tion of  the  Treasurer.  The  crops  had  been  a  fail- 
ure in  the  preceding  year,  and  the  clamors  of  the 
people  had  induced  the  preceding  legislature  to 
extend  by  several  months  the  time  for  paying 
taxes.  This  legislature  shrank  from  the  responsi- 
bility of  increasing  the  tax  rate  under  such  cir- 
cumstances, and  were  only  able  to  offer  as  a 
remedy  for  the  State's  financial  disease  a  tax  upon 
railroads.  A  law  ^  was  passed  which  gave  these 
corporations  the  option  of  submitting  to  a  tax  of 
one  and  one-half  per  cent  on  their  gross  earnings, 
or  of  forty  cents  per  one  hundred  dollars  of  their 
property  lying  in  the  State.  Tlie  courts  decided 
a  little  later  that  a  tax  on  gross  earnings  was 
unconstitutional,  so  the  latter  alternative  alone 
could  be  accepted. 

The  year  1876  did  not  bring  any  improvement 
to  the  finances  of  the  State.  Conditions,  on  the 
contrary,  grew  worse.  The  assessment  returns 
showed  a  reduction  in  the  value  of  the  property 
of  the  State  of  over  ten  million  dollars.  In  Sep- 
tember the  coupons  due  on  and  before  July,  1875, 

1  Acts  of  Tennessee  for  1875,  p.  100. 


IN  TENNESSEE,   MINNESOTA,   MICHIGAN.     141 

were  paid,  but  on  those  falling  due  subsequent  to 
this  date  the  State  was  obliged  to  default. 

By  this  time  the  State's  failure  to  pay  her  debts 
had  seriously  affected  the  credit,  not  only  of  her- 
self, but  of  corporations  and  individuals  within 
her  borders.  Every  branch  of  business  was  de- 
pressed, and  discouragement  and  dissatisfaction 
were  everywhere  observable.  The  collection  of 
taxes  was  a  work  of  extreme  difficulty,  and,  under 
the  tax  laws  of  the  State,  was  very  imperfectly 
accomplished.  The  arrearages  on  Jan.  1,  1877, 
amounted  to  11,570,659.^  Under  these  circum- 
stances the  necessity  for  compromise  with  the 
holders  of  bonds  became  apparent  to  all  who  gave 
the  matter  any  attention.  The  conviction  that 
an  increase  in  the  burdens  of  taxation  was  imprac- 
ticable and  impossible  was  widespread  and  inerad- 
icable. Threats  of  repudiation  were  not  wanting 
among  the  unscrupulous.  Among  the  wise  and 
thoughtful  the  plan  most  in  favor  was  the  scaling 
of  the  debt  twenty-five,  forty,  or  fifty  per  cent 
with  the  consent  of  the  bondholders,  accompanied 
by  a  guaranty  that  the  interest  would  be  punc- 
tually paid  on  the  remainder. 

Many  of  the  bondholders  showed  their  appre- 
ciation of  the  efforts  that  had  been  made  by  the 
State  to  meet  her  obligations,  and  their  sympathy 
for  her  in  her  financial  distress,  by  personally  com- 
municating to  the  Governor  their  willingness  to 

i  Financial  Chronicle  for  Jan.  13, 1877. 


142  REPUDIATION  OF  STATE  DEBTS 

compromise.  These  communications  were  given 
to  the  legislature  in  the  Governor's  message,  and 
thereupon,  Jan.  26,  1877,  that  body  adopted  the 
following  resolution :  ^  — 

JVhereas^  The  General  Assembly  has  with  pleas- 
ure received,  through  the  message  of  his  Excel- 
lency the  Governor,  the  communication  of  certain 
gentlemen,  holders  of  the  bonds  of  the  State  and 
representatives  of  holders  of  bonds,  asking  a  con- 
ference looking  to  a  permanent  and  equitable 
adjustment  and  compromise  of  the  claims  held  by 
them  against  the  State;  therefore  be  it 

Resolved^  By  the  General  Assembly  that  the 
Governor  be  requested  to  communicate  by  tele- 
grams or  by  letters  with  the  gentlemen  holding 
securities  of  the  State  mentioned  in  his  message, 
and  request  them  to  submit  at  the  earliest  day 
possible,  through  him,  to  the  General  Assembly 
any  proposition  or  propositions  of  adjustment  and 
compromise  which  they  may  desire. 

In  response  to  this  resolution  a  committee  of  the 
bondholders  met  a  committee  of  the  legislature, 
and,  after  consultation,  made  in  July  the  following 
proposition :  that  all  arrearages  of  interest  to  July 
1,  1877,  be  added  to  the  bonds,  and  that  new  ones 
for  sixty  per  cent  of  the  total  amount  be  issued, 
made  to  bear  interest  at  six  per  cent,  and  to  fall 
due  in  thirty  years.  The  legislature  met  this 
proposition    in   a  spirit  directly  contrary  to  that 

1  See  Acts  of  Tennessee  for  1877,  p.  239. 


IN  TENNESSEE,   MINNESOTA,   MICHIGAN.      143 

evinced  in  the  resolution.  They  not  only  rejected 
the  proposition,  but  the  payment  of  interest  on  the 
debt  was  made  absolutely  impossible  by  reducing 
the  tax  rate  from  forty  to  ten  cents  per  one  hun- 
dred dollars.^  The  Governor  was  very  much 
chagrined  at  this  result  of  his  negotiations,  and 
called  a  special  session  of  the  legislature  to  con- 
sider the  bondholders'  proposition,  and  to  take 
whatever  measures  seemed  necessary  for  the  settle- 
ment of  the  debt  question.  A  proposition  of  the 
bondholders,  modified  so  as  to  permit  a  scaling  of 
the  debt  to  fifty  per  cent  of  the  amount  of  the 
original  bonds  with  the  interest  added,  was  pre- 
sented to  the  General  Assembly  in  December,  1877, 
only  to  be  rejected  like  its  predecessor. 

In  the  interval  betAveen  this  and  the  regular 
session  of  1879  the  debt  question  was  much  dis- 
cussed, and  a  sentiment  in  favor  of  at  least 
partial  repudiation  grew  apace.  Political  dema- 
gogues aroused  suspicion  concerning  the  legality 
of  some  of  the  bonds,  and  the  poverty  of  the  State 
was  much  exaggerated.  The  legislature  of  1879 
consisted  of  a  body  of  men  who  had  the  conviction 
that  a  tax  of  thirty  cents  per  one  hundred  dol- 
lars was  the  highest  which  the  people  would 
or  could  endure,  and  that  an  investigation  into 
the  legality  of  the  bonds  should  precede  any 
compromise  with  the  bondholders.  It  met  in 
December,    1878,  and   appointed   a  committee  of 

1  Acts  of  Tennessee  for  1877,  p.  105. 


144  REPUDIATION  OF   STATE  DEBTS 

investigation,  which  reported  a  little  later  that  in 
the  case  of  the  issue  of  nearly  111,221,000  of  bonds, 
the  conditions  of  the  laws  authorizing  them  had 
not  been  complied  with ;  also  that  the  greater  part 
of  the  debt  was  the  result  of  corrupt  legislation, 
superinduced  by  corporate  bodies  seeking  State 
aid.i  This  report  doubtless  fostered  the  sentiment 
of  repudiation  already  rife  in  the  State,  and 
strengthened  the  determination  of  the  legislature 
to  force  a  compromise  at  a  very  low  rate. 

In  the  early  part  of  the  session  the  bondholders 
renewed  their  previous  proposition,  and  offered  also 
an  alternative  proposition  in  which  they  agreed  to 
accept  new  bonds  at  par  with  accrued  interest,  the 
same  to  bear  four  per  cent  interest,  and  the  coupons 
to  be  receivable  for  taxes.  A  bill  was  rejected  by 
the  House  which  proposed  to  scale  the  debt  fifty  per 
cent  and  to  make  the  new  bonds  bear  four  per  cent 
interest.  The  Senate  Committee  on  Finance  recom- 
mended the  funding,  with  accrued  interest,  of  the 
Capitol,  Hermitage,  and  Agricultural  bonds  held 
by  Mrs.  President  James  K.  Polk,  and  the  bonds 
of  the  State  educational  institutions,  at  sixty  cents 
on  the  dollar  and  four  per  cent  interest  ;  the 
funding  of  the  Union  Bank,  Bank  of  Tennessee, 
the  Tennessee,  Virginia,  and  Georgia,  and  the 
La  Grange  and  Memphis  railroad  bonds  at  fifty 
cents  on  the  dollar  and  four  per  cent  interest ;  and 

i  The  report  of  this  committee  may  be  found  in  the  Appendix 
to  the  Senate  Journal  of  Tennessee  for  1879. 


IN   TENNESSEE,   MINNESOTA,   MICHIGAN.     145 

the  bonds  funded  under  the  acts  of  1868  and  1873 
at  thirty-three  cents  on  the  dollar  and  four  per 
cent  interest.  It  also  recommended  the  repudiation 
entire  of  the  Mineral  Home  Railroad  and  some 
other  bonds,  and  the  payment  of  the  railroad  bonds 
issued  since  the  war  in  non-interest-bearing  war- 
rants at  thirty-three  cents  on  the  dollar,  the  same 
to  be  receivable  for  taxes  and  other  dues  to  the 
State.^  This  report  was  rejected,  after  discussion, 
and  a  new  bill  was  sketched  by  a  joint  committee 
of  both  houses  and  the  bondholders.  This  was 
approved  on  March  31. ^  It  was  to  become  a  law 
when  approved  by  the  people.  The  funding  act  of 
1873  had  been  repealed  by  act^  of  March  22,  1879, 
and  the  present  act  provided  for  the  settlement  of 
the  debt  question  by  the  issue  of  bonds  bearing 
interest  at  four  per  cent  to  be  exchanged  for  out- 
standing bonds,  with  the  interest  accrued  thereon, 
at  the  rate  of  fifty  cents  on  the  dollar.  A  com- 
mittee was  appointed  by  the  Governor  to  secure 
the  consent  of  at  least  two-thirds  of  the  bond- 
holders, and,  after  a  visit  to  New  York,  they 
reported  their  mission  accomplished.  Aug.  7, 
1879,  the  act  was  presented  to  the  people  for  their 
confirmation;  but,  much  to  the  regret  and  disgust 
of  those  who  had  hoped  that  the  matter  was  at  last 
settled,  they  rejected  it.     Another  expensive  legis- 

1  See  Financial  Chronicle  for  March  15, 1879. 

2  Acts  of  Tennessee  for  1879,  p.  247. 
8  Ihid.,  p.  189. 


146  BEPUBIATION   OF  STATE  DEBTS 

lature  had  thrown  away  its  labors.  The  same  old 
problem  confronted  its  successor. 

The  failure  of  these  repeated  attempts  at  com- 
promise, especially  the  last  one,  in  which  the 
creditors  of  the  State  had  agreed  to  scale  their 
claims  one-half,  and  accept  on  the  remainder  a  rate 
of  interest  much  lower  than  that  borne  by  the  old 
bonds,  justified  the  suspicion  of  the  bondholders 
that  the  State  would  eventually  repudiate  her 
debts  in  toto.  They  thus  felt  themselves  driven  to 
a  last  resort  in  the  defence  of  their  rights.  They 
now  claimed  that  their  bonds  constituted  a  lien 
upon  the  property  of  the  railroads  in  whose  aid 
they  were  issued,  and  that  the  State  legislature 
had  transcended  its  authority  in  dismissing  these 
liens.  Of  course  the  railroads  denied  the  obliga- 
tion to  pay  these  bonds,  and  the  matter  Avas  brought 
before  the  United  States  Circuit  Court  of  Ten- 
nessee for  adjudication.  The  court  decided  against 
the  bondholders,  and  the  latter  appealed  to  the 
Supreme  Court  of  the  United  States.  The  decision 
of  this  court  was  rendered  in  1883,  and  confirmed 
that  of  the  lower  court,  thus  destroying  the  hope 
of  the  bondholders.  ^ 

In  the  State  political  campaign  of  1880  the  debt 
question  was  the  chief  issue.  The  Democratic 
party  split  into  two  factions,  but  the  sentiment 
in  favor  of  the  bondholders  prevailed,  and  the 
General  Assembly  of  1881  legislated  entirely  in 

1  See  114  U.  S.,  G65. 


IN   TENNESSEE,   MINNESOTA,   MICHIGAN.      147 

their  interest.  An  act  ^  was  passed  much  more 
favorable  to  them  than  any  of  the  compromise 
bills  which  had  failed.  It  provided  for  the  fund- 
ing of  outstanding  bonds  and  overdue  coupons  at 
par;  the  new  bonds  to  bear  three  per  cent  interest, 
and  the  coupons  to  be  receivable  for  taxes.  The 
passage  of  this  act  was  the  cause  of  general  re- 
joicing, not  only  among  the  bondholders  but  among 
the  people  of  the  country  who  were  interested 
in  what  they  called  an  honest  settlement  of  the 
debts  of  the  Southern  States.  Congratulatory 
letters  were  written  from  various  quarters,  and  the 
financial  journals  wrote  congratulatory  editorials. 
That  faction  in  the  State,  however,  which  noAv 
became  known  as  the  repudiation  party,  was  not 
in  a  mood  to  receive  congratulations.  Several 
members  of  it  at  once  sought  ways  and  means  of 
preventing  funding  operations  under  the  act,  and 
found  them.  The  act  became  a  law  in  April; 
and  on  May  24  a  bill  was  served  on  the  Comp- 
troller at  Nashville,  by  the  sheriff  of  Davidson 
County,  enjoining  the  funding  board  from  carry- 
ing out  the  provisions  of  the  act. 

The  charges  made  in  this  bill  are  thus  stated  in 
the  Financial  Chronicle  for  May  28,  1881 :  "  The 
bill  alleges  that  the  Mineral  Home  railroad  bonds, 
and  the  bonds  issued  for  the  war  interest  and  Avar 
purposes  were  illegally  issued ;  that  the  funding 
act  was  procured  by  bribery ;  that  members  of  the 

1  Acts  of  Tennessee  for  1881,  p.  279. 


148  REPUDIATION    OF  STATE  DEBTS 

legislature  were  speculating  in  Tennessee  bonds 
when  the  act  was  passed ;  and  that  one  member 
received  110,000  and  another  |15,000  for  voting 
for  the  act.  The  bill  further  charges  that  the  act 
is  unconstitutional  because  it  appropriates  revenue 
for  ninety-nine  years,  while  the  constitution  pro- 
hibits appropriations  for  longer  than  two  years ; 
also  because  it  confers  judicial  powers  on  the  ex- 
ecutive officers  to  pass  upon  the  legality  of  bonds ; 
that  by  the  coupon  feature  the  school  fund  is 
diverted  from  its  legitimate  purpose ;  that  it  pro- 
vides for  funding  bonds  held  by  certain  bond- 
holders, but  excepts  bonds  held  by  charitable  and 
educational  institutions ;  that  the  act  fails  to  recite 
in  its  caption  or  otherwise  the  title  or  substance 
of  the  law  repealed,  revived,  or  amended ;  that  it 
repeals  the  section  of  the  act  of  March,  1873,  pro- 
hibiting the  reception  of  anything  but  treasury 
warrants,  gold,  and  silver,  United  States  bank- 
notes, and  the  old  issue  of  the  Bank  of  Tennessee 
for  taxes,  by  making  the  coupons  receivable  for 
taxes.  The  bill  further  alleges  that  the  act  is 
ambiguous,  and  asks  for  a  construction  of  the  act 
by  the  court." 

A  test  case  was  brought  before  the  Circuit 
Court,  and  the  charge  of  unconstitutionality  made 
in  the  bill  asking  for  an  injunction  was  sustained. 
The  legislature,  it  was  held,  could  not,  according 
to  the  constitution,  make  a  valid  contract  in  which 
the   coupons   should   be   receivable   for  taxes  for 


IN  TENNESSEE,  MINNESOTA,   MICHIGAN.      149 

ninety-nine  years.  Thus  was  the  rejoicing  of  the 
bondholders  again  turned  into  mourning,  and  the 
debt  question  once  more  relegated  to  the  people 
for  settlement. 

The  legislature  of  1882  was  more  successful, 
but  it  did  not  have  the  honor  of  bringing  the  con- 
troversy to  a  close.  In  April  a  meeting  of  the 
bondholders  was  held,  and  a  proposition  submitted 
to  the  legislature  to  fund  the  debt,  and  accrued 
interest  in  bonds  bearing  interest  at  four  per  cent 
for  three  years,  five  per  cent  for  five  years,  and  six 
per  cent  thereafter  until  maturity,  the  face  value 
of  the  bonds  to  equal  sixty  per  cent  of  the  total 
debt.  This  proposition  was  incorporated  in  a  bill 
which  became  a  law  on  May  20. ^  The  bonds  were 
to  fall  due  in  1912,  and  to  be  redeemable  after 
Jan.  1,  1887.  Under  this  act  funding  operations 
were  actually  commenced,^  but  they  had  not  pro- 
ceeded far  before  the  treasurer  announced  that  he 
would  not  pay  the  coupons  on  the  new  bonds 
which  would  fall  due  in  January,  1883 ;  and  when 
the  legislature  met  in  December,  1882,  a  joint 
resolution  was  passed  forbidding  the  payment  of 
any  interest  except  on  the  bonds  held  by  charitable 
institutions,  Mrs.  Polk,  and  the  United  States 
government.     In   his   message  to  the   legislature 


1  See  Acts  of  Tennessee  passed  by  the  Third  Extraordinary 
Session  of  the  Forty-Second  General  Assembly,  1882,  p.  6. 

2  The  Financial    Chronicle  for  Oct.  21,   1882,   reported  that 
^12,000,000  of  bonds  had  been  funded  under  the  new  act. 


150  REPUDIATION  OF  STATE  DEBTS 

Governor  Bate  said  that,  owing  to  a  late  defalca- 
tion, the  treasury  was  quite  empty,  and  maintained 
that  the  people  in  the  last  election  had  expressed 
themselves  as  opposed  to  the  late  funding  act,  and 
in  favor  of  a  settlement  on  quite  a  different  basis. 
He  then  outlined  a  plan  of  settlement  which  he 
thought  would  be  just  to  the  bondholders  and 
satisfactory  to  the  people.  His  recommendations 
were  incorporated  in  a  bill,  and  enacted  into  a  law 
on  March  20,  1883.1  The  statement  of  the  Gov- 
ernor proved  to  be  true,  and  this  law  settled  the 
controversy.  Its  chief  provisions  are  as  fol- 
lows :  — 

It  divides  the  debt  into  two  parts.  The  first 
part,  called  the  State  debt  proper,  is  made  to  con- 
sist of  the  following  bonds :  The  Capitol  bonds, 
$493,000  ;  the  Hermitage  bonds,  135,000 ;  the 
Agricultural  bonds,  $18,000 ;  the  Union  Bank 
bonds,  $125,000 ;  Bank  of  Tennessee  bonds,  $214,- 
000 ;  bonds  issued  to  turnpike  companies,  $741,- 
000;  Hiawssee  Railroad  bonds,  $280,000;  East 
Tennessee  and  Georgia  Railroad  bonds,  $144,000 ; 
Memphis  and  La  Grange  Railroad  bonds,  $68,000. 
After  adding  to  the  face  value  of  these  bonds  the 
interest  accruing  up  to  July,  1883,  they  are  })ut 
into  three  classes  according  as  they  bear  interest 
at  six,  five  and  one-fourth,  or  five  per  cent ;  and  it 
is  provided  that  the  first  class  shall  be  scaled 
twenty-four  per  cent,  the  second  class  twenty-one 

1  Acts  of  Tennessee  for  1883,  p.  70 ;  also  Appendix  V. 


IN  TENNESSEE,  MINNESOTA,   MICHIGAN.     151 

per  cent,  and  the  third  class  twenty  per  cent.  The 
new  bonds  of  each  class  are  made  to  bear  interest 
at  the  same  rate  as  the  old  ones. 

The  act  provides  that  bonds  which  represent 
funded  interest  shall  be  scaled  fifty  per  cent,  and 
that  the  bonds  for  which  they  are  exchanged  shall 
bear  interest  at  three  per  cent. 

The  second  part  comprises  ante-war  railroad 
bonds  amounting  to  $8,583,000  ;  post-war  railroad 
bonds  amounting  to  $2,638,000  ;  bonds  funded 
under  the  act  of  1866  amounting  to  $2,246,000; 
bonds  funded  under  the  act  of  1868  amounting  to 
$596,000 ;  and  bonds  funded  under  the  act  of 
1873  amounting  to  $4,867,000.  The  act  provides 
that  these  bonds  shall  be  scaled  fifty  per  cent,  and 
that  the  new  issue  shall  bear  interest  at  three  per 
cent.  The  bill  further  provides  for  the  refunding 
of  the  bonds  funded  under  the  act  of  1882  in  such 
a  manner  as  to  conform  to  the  above  conditions. 

Section  5  of  the  act  excepts  from  its  provisions 
all  existing  bonds  held  by  educational,  literary,  and 
charitable  institutions  of  the  State  on  Jan.  1, 1882, 
and  the  twenty-nine  bonds  held  by  the  widow  of 
James  K.  Polk. 

All  the  bonds  authorized  by  the  act  were  to  be 
payable  in  thirty  years,  and  redeemable  at  the 
pleasure  of  the  State  after  five  years. 


152  REPUDIATION  OF  STATE  DEBTS 

Minnesota, 

By  an  act  of  Congress  passed  March  3,  1857,  a 
grant  of  land  was  made  to  the  Territory  of  Min- 
nesota to  aid  in  the  construction  of  the  Minnesota 
and  Pacific,  the  Minneapolis  and  Cedar  Valley,  the 
Transit,  and  the  Southern  Minnesota  railroads. 
"  Every  alternate  section  of  land  designated  by 
odd  numbers,  for  six  sections  in  width,  on  each 
side  of  each  of  said  roads  and  branches"  was 
granted.  May  22,  1857,  the  legislature  of  the  ter- 
ritory accepted  the  grant,  and  provided  for  the 
execution  of  the  trust.^ 

The  railroad  companies  thus  assisted  had  neither 
the  money  nor  the  credit  which  was  needed  for 
the  prosecution  of  their  enterprises,  and  on  this 
account  applied  to  the  State  for  more  aid.  In 
order  to  grant  this,  an  amendment  to  the  constitu- 
tion was  necessary,  for  Section  5,  Article  9,  limited 
the  amount  of  the  State  debt  to  1250,000,  and  Sec- 
tion 10  prohibited  the  State  from  loaning  her  credit 
to  any  individual,  association,  or  corporation.  On 
April  15,  1858,  the  following  amendment  suitable 
for  the  purpose  was  submitted  to  the  people,  and 
carried  by  a  large  majority :  "  The  credit  of  the 
State  shall  never  be  given  or  loaned  in  aid  of  any 
individual,  association,  or  corporation  ;  except  that 
for  the  purpose  of  expediting  the  construction  of 
the  lines  of  railroads  in  aid  of  which  the  Congress 

1  See  Laws  of  Minnesota  for  1857,  p.  3. 


IN  TENNESSEE,   MINNESOTA,   MICHIGAN.      153 

of  the  United  States  has  granted  lands  to  the  Ter- 
ritory of  Minnesota,  the  Governor  shall  cause  to 
be  issued  and  delivered  to  each  of  the  companies 
in  which  said  grants  are  vested  by  the  legislative 
assembly  of  Minnesota,  the  special  bonds  of  the 
State,  bearing  an  interest  of  seven  per  cent  per 
annum,  payable  semi-annually  in  the  City  of  New 
York,  as  a  loan  of  public  credit,  to  an  amount  not 
exceeding  $1,250,000,  or  an  aggregate  amount  to 
all  of  said  companies  not  exceeding  15,000,000."  ^ 

Upon  the  application  of  the  companies  for  the 
issue  of  tliese  bonds.  Governor  Sibley  made  public 
what  he  deemed  to  be  the  correct  construction  of 
the  act  in  the  form  of  a  number  of  conditions  upon 
which  the  State  bonds  would  be  delivered.  The 
prime  condition  was  that  in  return  for  the  bonds 
the  State  must  receive  first  mortgage  bonds  of 
these  companies  in  amount  equal  to  the  State  bonds 
received  by  them,  giving  the  State  priority  of  lien 
upon  their  entire  lands,  roads,  and  franchises. 

The  companies  denied  that  the  Governor  had 
construed  the  act  properly,  and  one  of  them  (the 
Minnesota  and  Pacific  Railroad  Company)  appealed 
to  the  State  Supreme  Court  for  a  writ  of  mandamus 
to  compel  the  Governor  to  issue  the  bonds.  The 
court  decided  that  the  Governor's  ruling  was  erro- 
neous, and  that  the  State  by  her  own  act  had  placed 
herself  upon  a  like  footing  with  other  holders  of  the 
first  mortgage  bonds  of  the  companies  under  their 

1  Laws  of  Minnesota  for  1858,  p.  9. 


154  REPUDIATION  OF  STATE  DEBTS 

deeds  of  trust.^  After  this  Governor  Sibley  directed 
the  issue  of  the  bonds,  but  the  railroads,  even  with 
his  active  assistance,  could  negotiate  them  only 
with  great  difficulty.  The  bond-buying  public  had 
been  frightened  by  the  previous  disagreement  and 
refused  to  purchase. 

The  railroad  companies  could  not  negotiate  their 
own  bonds  except  at  ruinous  rates,  and  they  were 
compelled  to  stop  work  on  the  roads  and  to  default 
in  the  payment  of  their  obligations.  With  ruin 
staring  them  in  the  face,  they  proceeded  to  make 
terms  more  favorable  to  the  State.  The  Minne- 
apolis and  Cedar  Valley  Company  filed  in  the  ex- 
ecutive office  a  full  waiver  of  all  its  rights  under 
the  decision  of  the  Supreme  Court,  and  accepted  the 
original  terms  prescribed  by  the  Governor.  The 
Southern  Minnesota  Company  agreed  that  only 
$2,000,000  of  first  mortgage  bonds  should  be  issued 
on  its  entire  road,  including  $1,250,000  to  the 
State.  The  Transit  Company  and  the  Minnesota 
and  Pacific  Company  made  similar  concessions  in 
favor  of  the  State. 

All  this  repentance,  however,  came  too  late.  The 
work  did  not  go  on.  The  companies  defaulted  in 
the  interest  on  the  $2,275,000  of  bonds  which  the 
State  held,  and  the  State  was  obliged  to  foreclose 
her  mortgages.  She  thus  acquired  about  two  hun- 
dred and  fifty  miles  of  graded  road,  the  franchises 
of  the  companies,  and  lands  amounting  to  about 

1  Minnesota  Reports,  vol.  ii.  p.  13. 


IN  TENNESSEE,  MINNESOTA,  MICBIQAN.     155 

five  million  acres  as  indemnification  for  the  $2,275,- 
000  of  bonds  which  she  had  issued.^ 

At  this  time  the  State  was  young,  and  her 
resources  were  undeveloped.  A  debt  of  over 
$2,000,000  was  a  great  burden,  and,  moreover,  the 
people  felt  that  they  had  been  swindled.  Repu- 
diation was  suggested  at  once,  and  met  with  favor. 
In  1860  the  feeling  against  the  bonds  was  so  strong 
that  an  amendment  ^  to  the  constitution  was  adopted 
which  forbade  the  payment  of  the  principal  or  the 
interest  on  tliem  without  the  previous  consent  of 
the  people.  Regarding  this  settlement  as  final, 
subsequent  legislatures  granted  the  lands,  road- 
bed, and  franchises  which  the  State  had  secured 
by  the  foreclosure  of  her  mortgages,  to  existing 
companies  free  and  clear.^ 

The  bondholders,^  however,  were  not  disposed  to 
submit  to  this  settlement  without  a  struggle.  One 
of  the  contractors,  who  had  received  payment  in 
bonds,  submitted  his  claims  to  tke  United  States 
Court  of  the  State  for  adjudication.  He  pleaded 
that  the  property  of  the  roads  of  which  the  State 
had  taken  possession  constituted  a  security  for  the 

1  Only  this  amount  of  bonds  had  been  issued  by  the  State  before 
the  failure  of  the  railroads. 

2  Laws  of  Minnesota  for  1860,  p.  297. 

8  See  acts  of  March  10,  18G2.— Laws  of  Minnesota  for  1862,  pp. 
226  and  247. 

4  The  State  bonds  which  could  not  be  sold  upon  the  market  had 
been  used  by  the  company  to  pay  contractors  and  others  to  whom 
they  were  indebted,  and  had  thus  come  into  the  hands  of  innocent 
holders. 


156  REPUDIATION  OF  STATE  DEBTS 

bondholders,  but  the  decision  of  the  court  blasted 
his  hopes  and  those  of  others  under  conditions  simi- 
lar to  his.  It  held  "  that  where  land  is  conveyed 
to  the  State  by  a  corporation  as  indemnity  against 
losses  on  State  bonds  loaned  to  it,  the  bondholders 
have  no  equity  for  the  application  of  the  land  to 
the  payment  of  the  bonds  which  can  be  enforced 
against  the  State." 

Thus  the  matter  rested  until  Feb.  28,  1866, 
when  an  act  ^  was  passed  authorizing  the  appoint- 
ment of  commissioners  to  receive  propositions 
from  the  holders  of 'railroad  bonds,  and  to  inquire 
into  and  examine  all  claims  arising  under  tlie 
amendment  to  Section  10,  Article  9  of  the  constitu- 
tion, adopted  April  15,  1858.  The  act  further 
declared /orever  barred  all  claims  which  should  not 
be  presented  to  these  commissioners  prior  to  Jan. 
.1,  1867.  The  outcome  of  the  proceedings  which 
followed  this  enactment  was  the  law  of  March  5, 
1867,2  which  ai>tliorized  the  establishment  of  a 
sinking  fund  for  the  redemption  of  these  bonds. 
To  this  purpose  was  to  be  devoted,  according  to 
the  enactment,  the  proceeds  from  the  lands  granted 
the  State  by  the  act  of  Congress  of  Sept.  4,  1841,^ 
and  all  moneys  paid  into  the  treasury  by  the  sev- 
eral railroads  as  or  in  lieu  of  taxes.     According  to 

1  Laws  of  Minnesota  for  1866,  p.  9. 

2  Ibid.,  1867,  p.  93. 

8  This  act  was  entitled  **  An  act  to  appropriate  the  proceeds  of 
sales  of  public  lands  and  to  grant  pre-emption  rights."  Under  it 
Minnesota  acquired  about  five  hundred  thousand  acres  of  laud. 


IN   TENNESSEE,   MINNESOTA,   MICHIGAN.      157 

the  amendment  to  the  constitution  already  noticed, 
the  act  had  to  be  approved  by  the  people  before  it 
could  be  enforced.  It  was  therefore  submitted  to 
vote  at  the  next  general  election,  but  was  defeated 
by  a  considerable  majority.  It  was  in  no  sense  a 
political  measure,  and  the  rejection  of  the  act  was 
due  to  the  popular  feeling  that  the  State  was  not 
in  justice  bound  to  pay  this  debt. 

In  1869  the  so-called  "  Delano  Bill "  was  passed 
by  the  legislature,  "  which  in  substance  gave  one 
man  thirteen  years  in  which  to  buy  up  the  bonds 
at  his  own  price,"  witli  the  understanding  that 
he  was  to  receive  the  five  hundred  thousand  acres 
of  land  acquired  by  the  act  of  Congress  of  Sept. 
4,  1841,  in  exchange  therefor.  This  bill  was 
vetoed  by  the  Governor,  however,  and  thus  the 
whole  matter  was  again  relegated  to  the  legislature 
and  people  for  settlement.  The  next  State  legis- 
lature took  up  the  case  and  passed  the  so-called 
''Land  Bond  Bill,"  ^  which  received  the  signature 
of  the  Governor  and  the  sanction  of  the  people, 
but  unfortunately  not  the  approval  of  the  bond- 
liolders.  It  provided  for  the  exchange  of  the 
State  railroad  bonds  with  unpaid  coupons  attached, 
for  portions  of  the  five  hundred  thousand  acres  of 
land  above  mentioned,  the  land  to  be  rated  at  not 
less  than  $8.70  per  acre.  It  further  provided  that 
the  act  should  not  go  into  force  until  at  least  two 
thousand  of  the   State    railroad   bonds   had   been 

1  Laws  of  Minnesota  for  1870,  p.  19. 


158  BEPUDIATION  OF  STATE  DEBTS 

deposited  with  a  commissioner  appointed  for  the 
purpose.  Inasmuch  as  the  minimum  price  for 
which  the  land  was  to  be  exchanged  was  about 
four  times  its  market  value  at  the  time,  the  bond- 
holders were  not  attracted  by  the  offer,  and  the 
requisite  two  thousand  bonds  were  never  deposited. 

Further  attempts  to  use  these  lands  for  the  pay- 
ment of  the  bonds  were  delayed  by  a  constitutional 
amendment  adopted  in  November,  1873,  which 
forbade  any  moneys  derived  from  the  sale  of  these 
lands  being  appropriated  "for  any  purpose  what- 
ever until  the  enactment  for  that  purpose  shall 
have  been  approved  by  a  majority  of  the  electors 
of  the  State,  voting  at  the  annual  general  election 
following  the  passage  of  the  act."  ^ 

At  the  opening  of  the  legislative  session  of 
1876,  both  the  retiring  Governor,  C.  K.  Davis, 
and  the  incoming  Governor,  J.  S.  Pillsbury,  urged 
the  legislature  to  give  careful  attention  to  the 
State  railroad  bonds.  They  reviewed  the  previous 
legislation  upon  the  subject,  insisted  upon  the 
obligation  of  the  State,  and  dwelt  upon  the  dis- 
grace, injustice,  and  bad  policy  of  repudiation.  In 
his  message  to  the  next  legislature  Governor 
Pillsbury  again  referred  to  the  matter  in  vigorous 
terms,  and  this  time  with  success.  An  act  ^  was 
passed  March  1  providing  for  the  funding  of  the 
"  Minnesota  State  Railroad  Bonds "  into  new  six 

1  Laws  of  Minnesota  for  1872,  p.  63.      . 

2  Ibid.,  1877,  p.  183. 


IN  TENNESSEE,  MINNESOTA,   MICHIGAN.     159 

per  cent  bonds,  the  rate  of  exchange  being  sixteen 
hundred  dollars  in  new  bonds  for  each  one  thou- 
sand dollar  old  bond,  the  additional  six  hundred 
dollars  being  indemnification  for  unpaid  interest. 
To  the  surprise  and  mortification  of  those  who 
were  eager  to  see  the  honor  of  the  State  vindicated, 
the  people  rejected  this  act  by  a  very  large  vote. 

It  now  became  evident  that  the  people  were 
determined  to  repudiate  these  bonds,  and  that,  if 
the  State  were  ever  to  be  cleared  of  the  disgrace 
of  such  an  act,  some  means  must  be  devised  by 
which  the  settlement  of  the  matter  could  be  left 
to  the  legislature.  The  constitutionality  of  the 
amendment  of  1860  having  been  questioned  very 
often,!  the  legislature  of  1881  determined  to  force 
a  decision  concerning  its  validity  from  the  Supreme 
Court  of  the  State.  Accordingly  on  March  2  it 
passed  an  act^  which  constituted  the  judges  of 
the  Supreme  Court  a  tribunal  to  decide  whether 
the  legislature  had  the  right  to  provide  for  the 
payment  of  the  bonds  without  submitting  the  mat- 
ter to  a  vote  of  the  people,  and  also  to  decide  all 
cases  that  might  arise  in  the  settlement  of  the  State 
railroad  bonds.  It  further  provided  for  the  issue 
of  new  bonds  in  exchange  for  the  old  ones  with 
accrued  interest  at  the  rate  of  fifty  cents  on  the 

1  The  Supreme  Court  of  the  United  States  had  incidentally 
declared  that  it  violated  the  obligation  of  the  contract  between 
the  State  and  the  bondholders.  —  See  Farnsworth  v.  Minnesota 
and  Pacific  Railroad  Company,  92  U.  S.,  49. 

2  Laws  of  Minnesota  for  1881,  p.  117. 


160  BEPUDIATION  OF  STATE  DEBTS 

dollar.  The  Supreme  Court  judges  refused  to 
serve  on  this  tribunal,  and  five  district  judges 
were  appointed  in  their  places.  Before  they  were 
able  to  proceed  with  the  business  in  hand,  how- 
ever, a  writ  of  prohibition  was  served  upon  them 
by  a  resident  taxpayer  (D.  A.  Secombe,  Esq.), 
and  the  matter  was  thus  brought  before  the 
Supreme  Court.  As  had  been  hoped,  it  decided 
that  the  amendment  of  1860  was  unconstitutional, 
and  that  the  legislature  had  a  right  to  settle  the 
question  of  the  railroad  bonds  without  submitting 
their  acts  to  a  vote  of  the  people.^ 

This  decision  cleared  the  road  for  the  final  set- 
tlement. The  whole  matter  was  once  more  rele- 
gated to  the  legislature  for  treatment.  Governor 
Pillsbury  called  a  special  session  of  that  body  in 
September,  1881,  and  it  passed  an  act^  which 
brought  the  controversy  to  a  close.  This  act  pro- 
vided for  the  issue  of  bonds  to  be  known  as  "  Min- 
nesota State  Railroad  Adjustment  Bonds,"  whicli 
were  to  be  exchanged  for  the  outstanding  bonds 
which  had  been  issued  to  railroads,  and  the  inter- 
est accrued  thereon,  at  the  rate  of  fifty  dollars  of 
tlie  former  for  one  hundred  dollars  of  the  latter. 
These  new  bonds  were  to  be  dated  July  1,  1881, 
and  were  to  bear  interest  at  five  per  cent.  They 
were  to  be  payable  at  the  option  of  the  State  after 
ten  years,  and  were  to  fall  due  in  thirty  years, 

1  See  State  ?;.  Young,  Minnesota  Reports,  vol.  xxix.  p.  474. 

2  See  Laws  of  Minnesota,  Extra  Session,  1881,  p.  13. 


IN  TENNESSEE,   MINNESOTA,  MICHIGAN.      161 

provided  the  State  could  not  negotiate  her  bonds 
at  a  lower  rate  of  interest  than  five  per  cent.  In 
case  her  credit  improved  to  such  an  extent  that 
her  bonds  could  be  negotiated  at  a  lower  rate  of 
interest  than  five  per  cent,  the  State  reserved  the 
right  to  pay  the  bonds  in  cash. 

The  settlement  of  this  vexed  question  on  this 
comparatively  honorable  basis  had  the  anticipated 
effect  upon  the  State's  credit.  In  less  than  a  year 
after  the  passage  of  the  act  of  settlement  Minnesota 
bonds  bearing  four  and  a  half  per  cent  interest 
were  sold  in  quantities  sufficient  to  permit  the 
retirement  of  the  railroad  adjustment  bonds.  ^ 

Michigan. 

March  21,  1837,  the  first  State  legislature  of 
Michigan  authorized  her  Governor  to  negotiate  a 
loan  of  15,000,000,  the  proceeds  of  which  were  to 
be  employed  in  constructing  a  system  of  public 
improvements.  This  was  in  pursuance  of  a  policy 
outlined  in  the  Governor's  message,  and  in  keep- 
ing with  the  spirit  of  the  times,  but  it  ultimately 
brought  the  State  into  difficulties,  the  settlement 
of  which  gives  her  a  place  in  this  book. 

The  times  were  unfavorable  for  the  negotiation 
of  a  loan,  owing  to  the  suspension  of  specie  pay- 
ments throughout  the  Union  and  the  general 
feeling  of  insecurity  caused  by  the  crisis.  The 
Governor  visited  the  New  York  market  with  little 

J  See  Tenth  Census,  vol.  vii.  p.  6.34. 


162  EEPUDIATION  OF  STATE  DEBTS 

success,  but  upon  his  return  received  communica- 
tions from  the  Morris  Canal  and  Banking  Com- 
pany offering  him  ninety-seven  and  one-half  cents 
per  dollar  for  the  bonds.  Since  the  law  did  not 
permit  him  to  sell  below  par,  he  hired  the  com- 
pany to  sell  the  bonds  as  agent  for  the  State  at  a 
commission  of  two  and  a  half  per  cent.  Under 
this  contract  bonds  to  the  amount  of  $1,362,000 
were  sold,  and  the  proceeds  paid  into  the  State 
treasury.  The  residue  of  the  bonds  were  turned 
over  by  the  company  to  the  United  States  Bank 
of  Pennsylvania,  and  said  bank  agreed  to  become 
guarantor  for  three-fourths  of  the  sum.  This 
amounted  to  a  partial  sale  of  the  bonds  on  time, 
but  the  bank  failed  before  any  considerable 
amount  of  money  had  been  paid  into  the  treasury. 

On  account  of  these  disasters  the  State  was  un- 
able to  meet  her  interest  payment  in  July,  1842. 
Investigation  showed  that  bonds  to  the  amount 
of  $1,387,000  had  been  sold  and  paid  for  in  full, 
and  that  upon  others,  namely,  those  pledged  as 
security  for  loans  to  it  by  the  United  States  Bank 
of  Pennsylvania,  only  partial  payments  had  been 
made. 

kn  act^  passed  Feb.  17,  1842,  provided  for 
the  adjustment  of  the  loan  in  the  following  man- 
ner :  The  auditor  general  and  treasurer  were 
required  to  make  out  a  full  and  accurate  state- 
ment of  the  amount  of  money  received  by  the 

1  Laws  of  Michigan  for  1842,  p.  102. 


IN   TENNESSEE,  MINNESOTA,  MICHIGAN.      163 

State  for  the  bonds  upon  which  partial  payments 
had  been  made,  and  to  add  thereto  interest  at  the 
rate  of  six  per  cent  per  annum  to  July  1,  1841. 
From  this  they  were  to  deduct  a  percentage  — 
which  they  should  deem  just  —  for  the  damages 
brought  upon  the  State  by  the  failure  of  the  con- 
tracting parties  to  pay  the  instalments  still  re- 
maining due  on  the  loan.  The  Governor  was 
then  authorized  to  issue  a  proclamation  requiring 
the  holders  of  bonds  to  deliver  to  the  treasurer 
for  cancellation  those  for  which  the  State  had 
received  no  equivalent,  or  to  deliver  to  him  all 
the  bonds  they  might  hold,  and  to  receive  in  return 
other  bonds  for  the  amount  found  to  be  their  due. 
The  auditor  and  treasurer  were  further  authorized 
to  negotiate  with  the  bondholders  for  the  sale  of 
the  railroads  and  other  public  works  belonging  to 
the  State,  and  also  of  the  public  lands  which  had 
been  received  by  the  State  under  a  recent  act  of 
Congress. 

The  amount  ascertained  to  be  due  on  the  part- 
paid  bonds  was  1302.73  per  one  thousand  dollars. 
All  but  a  few  thousand  dollars'  worth  of  these 
have  been  surrendered,  and  hew  bonds  issued  in 
their  stead. 

The  State  has  always  declared  her  willingness 
and  her  obligation  to  pay  every  bond  for  which 
she  had  received  consideration,  although  the 
money  was  squandered  in  works  for  which  she 
received  no  benefit.     Her  case  would  have  been 


164  REPUDIATION  OF  STATE  DEBTS. 

entirely  sound,  and  her  action  fully  justified,  had 
it  not  been  for  the  fact  that  the  Morris  Canal  and 
Banking  Company  and  the  United  States  Bank  of 
Pennsylvania  had  sold  some  of  the  bonds  to  inno- 
cent persons.  That  they  had  a  right  to  transmit 
ownership  in  the  bonds  cannot  be  questioned. 
The  fact  that  the  State  had  not  received  her  pay 
for  them  did  not  interfere  with  the  title  of  the 
European  bankers  who  had  paid  the  United  States 
Bank  of  Pennslyvania  for  them  in  full. 


VI. 

REPUDIATION  IN  VIRGINIA. 


CHAPTER  VI. 

REPUDIATION   IN   VIRGINIA. 

The  Civil  War  left  the  State  of  Virginia  with 
an  enormous  debt.  In  1861  it  amounted  to  more 
than  $33,000,000,  and  with  accrued  interest  it 
amounted  on  Jan.  1,  1870,  to  more  than  #45,- 
000,000.  Arrangements  for  the  refunding  of 
this  debt,  and  for  the  making  of  provisions  for 
the  payment  of  the  annual  interest  charge,  as 
well  as  the  ultimate  payment  of  the  principal, 
early  occupied  the  attention  of  the  legislature  of 
the  State,  and  the  result  was  the  passage  of  the 
funding  act  of  1871.  ^ 

This  act  divided  the  debt  into  two  parts.  One- 
third  was  set  aside  as  West  Virginia's  share  of  the 
joint  indebtedness  of  the  two  States  before  they 
were  separated.  For  these  bonds  certificates  were 
issued  setting  forth  that  "payment  of  the  amount, 
with  interest  thereon  at  the  rate  prescribed  in  the 
bonds  surrendered,  will  be  provided  in  accordance 
with  such  settlement  as  shall  hereafter  be  made 
between  the  States  of  Virginia  and  West  Virginia," 
and  that  "the  State  of  Virginia  holds  said  bonds, 

1  Acts  of  Virginia  for  1870-71,  p.  378. 
167 


168  REPUDIATION  OF  STATE  DEBTS. 

SO  far  as  unfunded,  in  trust  for  the  holder  or  his 
assignees." 

This  provision  amounted  to  a  repudiation  of  all 
these  bonds,  the  blame  for  which  belongs  either 
to  Virginia  or  West  Virginia,  or  both.  No  settle- 
ment between  these  two  States  has  ever  been  made, 
all  attempts  having  failed  through  the  irreconcil- 
able character  of  their  views  concerning  a  jast 
distribution  of  the  burden.  Virginia  has  persist- 
ently claimed  that  West  Virginia's  just  share 
was  one-third,  on  the  ground  that  she  took  away 
from  the  old  State  about  one-third  of  her  territory 
and  population.  West  Virginia,  on  the  other 
hand,  has  claimed  that  inasmuch  as  the  greater 
part  of  the  money  borrowed  on  the  security  of 
the  bonds  was  expended  in  public  improvements 
within  the  borders  of  Virginia,  she  ought  to  pay 
only  the  debt  contracted  in  making  improvements 
within  her  borders,  together  with  her  proportion 
of  the  current  expenses  since  1824,  after  being 
credited  with  all  the  State  taxes  paid  into  the 
treasury  since  that  date  by  the  counties  of  which 
she  is  composed.  Up  to  date  neither  party  has 
seen  fit  to  yield  enough  to  make  a  compromise 
possible ;  and,  in  view  of  the  fact  that  the  matter 
has  now  for  several  years  been  dropped  out  of  dis- 
cussion, it  is  probable  that  the  holders  of  these 
bonds  will  nevei:  receive  a  single  cent  of  their  just 
and  undisputed  dues. 

For  the  two-thirds  of  the  debt  considered  Vir- 


REPUDIATION  IN   VIRGINIA.  169 

ginia's  share,  the  act  of  1871  provided  that  new 
bonds  payable  in  thirty-four  years,  and  bearing 
interest  at  six  per  cent,  should  be  issued;  that 
these  bonds  should  be  either  coupon  or  registered ; 
and  that  the  coupons  should  be  receivable  at  and 
after  maturity  for  "all  taxes,  dues,  debts,  and 
demands  due  the  State."  One  class  of  bonds,  the 
so-called  five  per  cent  dollar  bonds,  were  excepted 
from  the  provision  which  fixed  the  rate  of  interest 
at  six  per  cent,  and  were  made  to  bear  five  per 
cent  interest,  the  same  rate  as  formerly. 

This  act  was  the  immediate  occasion  of  the  debt 
controversy  which  has  continued  up  to  the  pres- 
ent time,  but  Avhich  we  may  hope  is  now  at  an 
end.  Two  views  were  at  that  time  held  regard- 
ing the  duty  of  the  State  to  her  creditors,  and 
regarding  the  policy  which  she  ought  to  pursue. 
The  one  was  that  the  State  was  holden  for  and  in 
duty  bound  to  pay  the  principal  of  the  old  debt 
and  the  interest  that  had  accrued  during  the  war 
and  the  subsequent  period,  and  that  the  rate  of 
interest  in  the  future  should  be  not  much  if  any 
less  than  that  yielded  by  the  old  bonds.  The  act 
in  question  carried  out  this  view.  It  provided 
for  the  funding  of  the  overdue  interest  certificates 
and  coupons,  as  well  as  for  the  bonds  themselves, 
and  all  the  new  bonds  were  to  bear  six  per  cent 
interest,  except  those  given  in  exchange  for  the 
bonds  which  had  only  yielded  five  per  cent.  This 
view  was  held  by  those  who  regarded  the  State's 


170  REPUDIATION  OF  STATE  DEBTS. 

honor  as  of  the  first  importance,  and  who  looked 
at  the  matter  from  the  bondholders'  standpoint. 
The  clause  which  provided  that  the  coupons  of 
the  consols,  as  the  new  bonds  were  called,  should 
be  receivable  for  taxes  and  other  dues  to  the  State 
was  doubtless  intended  to  offset  that  clause  of 
the  act  which  was  displeasing  to  the  bondholders ; 
namely,  the  clause  which  compelled  them  to 
accept  for  one-third  of  their  bonds  certificates 
which  were  to  be  paid  by  West  Virginia. 

Other  persons  viewed  the  debt  question  from  the 
standpoint  of  the  immediate  interests  of  the  State. 
They  were  impressed  by  the  fact  that  the  assessed 
valuation  of  property  in  the  State  for  taxation 
purposes  was  less  than  one-half  of  what  it  had 
been  before  the  war,  and  that  the  income  of  the 
State  had  diminished  from  $4,000,000  to  about 
12,500,000.  The  settlement  provided  for  by  the 
act  of  1871  placed  upon  this  comparatively  small 
revenue  an  interest  charge  of  more  than  one  and 
one-half  millions  of  dollars,  and  left  for  the  pay- 
ment of  the  regular  expenses  of  the  State  a  very 
inadequate  sum.  In  the  opinion  of  such  persons 
the  problem  could  only  be  solved  by  a  great 
reduction  in  the  rate  of  interest  to  be  paid,  or  by 
a  reduction  of  both  principal  and  interest.  The 
masses  seemed  to  take  this  view  of  the  matter. 
At  any  rate,  the  legislature  which  met  in  1872 
inaugurated  an  attack  upon  the  funding  act  of 
1871  which  was  renewed  at  intervals  for  sixteen 
years. 


REPUDIATION  IN   VIRGINIA.  171 

This  attack  was  directed  against  the  clause 
which  made  the  coupons  of  the  consols  receivable 
for  taxes  and  other  dues  to  the  State.  In  March 
an  act  ^  was  passed  which  provided  that  collectors 
should  receive  in  payment  of  taxes  gold,  silver, 
United  States  treasury  notes  or  notes  of  the 
national  banks  of  the  United  States,  and  noth- 
ing else,  and  which  repealed  all  law^s  in  conflict 
thereto.  It  was  thought  that  thus  the  objection- 
able clause  could  be  gotten  rid  of,  but  unfortu- 
nately the  time  had  passed  when  its  repeal  was 
possible.  By  Dec.  1,  1871,  121,610,691  of  con- 
sols had  been  issued. ^  Each  one  of  these  bonds 
represented  a  valid  contract  between  the  State  and 
its  holder,  w^hich  bound  the  former  to  receive  the 
coupons  in  payment  of  taxes  and  all  other  dues 
to  the  State.  The  act  of  1872  was  clearly  a 
violation  of  this  contract.  It  was  so  regarded  by 
the  bondholders  from  the  first,  and  it  was  so 
declared  by  the  Supreme  Court  of  Appeals  of  the 
State  at  its  November  term  of  1872.^  The  court 
declared  in  unmistakable  language  that  the  act 
of  1871  constituted  a  valid  contract  between  the 
State  and  the  holders  of  bonds  and  coupons,  and 
that  the  act  of  March  7,  1872,  so  far  as  it  con- 
flicted with  this  contract,  was  void  and  of  no 
force. 

1  Acts  of  Virginia  for  1871-72,  p.  141. 

2  Tenth  Census,  vol.  vii.  p.  558. 

3  See  Antoni  v.  Wright,  22  Gratt.,  833. 


172  BEPUDIATION  OF  STATE  DEBTS. 

After  the  rendition  of  this  decision,  and  up  to 
the  legislative  session  of  1873,  the  treasurer  was 
obliged  to  receive  coupons  in  payment  of  taxes. 
Meantime  the  necessity  of  either  lowering  the  in- 
terest charge,  or  of  increasing  the  State's  income, 
became  more  apparent.  Each  year  a  portion  of 
the  interest  had  been  left  unpaid,^  the  arrearage  on 
Jan.  1,  1874,  amounting  to  12,600,000.  The  pay- 
ment of  coupons  cat  from  the  bonds  and  owned 
by  tax-payers  could  not  be  avoided,  but  the  inter- 
est on  the  "pealer  debt"^  could  be  and  was 
neglected.  The  panic  of  1873  was  a  heavy  blow 
to  the  financial  interests  of  the  State.  It  pros- 
trated business,  destroyed  sources  of  taxation,  and 
diminished  the  revenue. 

The  legislature  of  1873  had  to  face  the  same 
problem  as  its  predecessor,  but  it  was  obliged  to 
proceed  in  the  full  consciousness  of  the  fact  that 
the  act  of  1871  was  irrepealable,  and  that  coupons 
must  be  received  in  payment  of  taxes.  Attempts 
to  reduce  the  interest  having  proved  unavailing, 
the  only  resort  was  to  heavier  taxation.  In  search- 
ing about  for  new  objects  upon  which  to  levy  taxes, 
the  legislators  readily  bethought  themselves  of  the 

1  See  Acts  of  Virginia  for  1871-72,  p.  218 ;  also  American  Law 
Review,  vol.  xxiii.  p.  92G. 

2  The  creditors  who  accepted  the  funding  act  after  March  7, 
1872,  accepted  it  subject,  of  course,  to  the  Amendatory  Act  of  that 
date.  (Wise  Brothers  v.  Rogers,  24  Gratt.,169.)  They  received 
\7hat  are  known  as  "  Pealer  Bonds."  —  American  Law  Review » 
vol.  xxiii.  p.  927. 


REPUDIATION  IN   VIRGINIA.  173 

consols  and  their  coupons.  What  they  had  failed 
to  accomplish  by  the  act  of  1872  might  possibly 
be  carried  out,  it  was  thought,  by  a  law  which 
would  include  these  bonds  and  coupons  under  the 
head  of  taxable  property.  Accordingly  an  act^ 
was  passed  on  March  25,  which  authorized  the 
State  treasurer  to  deduct  from  the  interest  payable 
on  the  bonds,  whether  funded  or  unfunded,  a  tax 
equal  to  fifty  cents  per  one  hundred  dollars  of  their 
market  value,  and  which  made  it  the  duty  of  every 
officer  of  the  State  charged  with  the  collection  of 
taxes  to  deduct  such  tax  from  matured  coupons 
which  might  be  tendered  in  payment  of  dues  to 
the  State. 

The  controversy  which  had  been  settled  for  a 
time  by  the  decision  of  the  Supreme  Court  of 
Appeals  was  now  resumed.  This  act  was  inter- 
preted as  a  second  attempt  to  violate  the  contract 
of  1871.  Foreign  holders  of  bonds  felt  them- 
selves aggrieved  by  being  compelled  to  pay  taxes 
on  money  Avhich  they  had  lent  to  the  State. 
Their  arguments  availed  with  the  legislature  of 
the  following  year,  which  amended  the  act  of  1873 
so  as  to  make  it  non-applicable  to  foreigners.^ 
This,   however,  did  not  remove  their   grievance. 

1  Acts  of  Virginia  for  1872-73,  p.  207.  "  An  earlier  act,  that  of 
April  5,  1872,  provided  that  the  tax  should  be  deducted  from  cou- 
pons paid  by  the  State,  but  did  not  provide  for  such  deduction  from 
coupons  presented  in  payment  of  taxes.  The  present  act  remedied 
this  oversight." 

2  Acts  of  Virginia  for  1874,  p.  300. 


174  REPUDIATION  OF  STATE  DEBTS. 

The  tax  had  greatly  injured  the  market  value  of 
coupons.  Tax-payers  had  heretofore  been  quite 
willing  to  buy  them  at  a  small  discount,  but  now 
the  discount  must  be  great  enough  to  cover  the 
tax  also,  else  they  would  not  buy.  In  reality  the 
bondholders  still  had  to  pay  the  tax,  or  take  their 
chances  on  getting  their  coupons  cashed  at  the 
treasury,  and  their  prospects  became  worse  each 
day.  All  bondholders  who  were  not  themselves  tax- 
payers had  this  grievance,  and  were  not  slow  in 
making  it  known.  They  won  strong  supporters 
among  the  people,  but  the  legislatures  of  1875  and 
1876  continued  to  oppose  them.  In  the  latter  year 
a  law  1  was  enacted  which  restored  the  act  of  1873 
to  its  original  scope,  and  made  the  tax  applicable 
to  all  bonds  and  coupons  by  whomsoever  held. 
The  bondholders  now  appealed  to  the  courts,  and 
in  the  celebrated  case  of  Hartman  v.  Greenhow,^ 
tried  first  before  the  Supreme  Court  of  Appeals 
of  the  State,  and  then  before  the  Supreme  Court  of 
the  United  States,  they  gained  a  second  victory, 
and  baffled  once  more  the  attempts  of  the  re- 
adjusters  to  nullify  the  legislation  of  1871. 

The  Supreme  Court  of  the  United  States  held 
that  the  act  of  1876  violated  the  contract  made 
with  the  bondholders  in  1871  in  so  far  as  it  ap- 
plied to  coupons  separated  from  the  bonds  and 
held  by  a  different  owner.     In  delivering  the  opin- 

1  Acts  of  Virginia  for  1875-76,  p.  203. 
«  102  U.S.,  672. 


REPUDIATION  IN   VIRGINIA.  175 

ion  of  the  court  Mr.  Justice  Field  said,  "  The  act 
of  1876  declares  that  the  coupons  shall  not  be  thus 
received  for  taxes  and  dues  owing  by  the  holders 
of  them  for  their  full  amount,  but  only  for  such 
portions  as  may  remain  after  a  tax  subsequently 
levied  upon  the  bonds  to  which  they  were  origi- 
nally attached  is  deducted,  though  the  bonds  be 
held  by  other  parties.  If  this  does  not  impair  the 
contract  with  the  bondholder,  who  was  authorized 
to  transfer  to  others  the  coupons  with  this  quality 
of  receivability  for  taxes  annexed,  and  also  the 
contract  with  the  bearer  of  the  coupon  written  on 
its  face  that  it  shall  be  received  for  all  taxes  to  the 
State,  it  is  difficult  to  see  in  what  way  the  contract 
with  either  would  be  impaired,  even  though  the 
tax  on  the  bon(?  should  be  equal  to  the  whole  of 
its  coupon.  If,  against  the  express  terms  of  the 
contract,  the  State  can  take  a  portion  of  the  interest 
in  the  shape  of  a  tax  on  the  bond,  it  may  at  its 
pleasure  take  the  whole."     (p.  685.) 

Since  1872  the  legislature  had  been  in  the  con- 
trol of  the  readjusters,  as  the  enemies  of  the  fund- 
ing act  of  1871  were  called.  To  this  category 
belonged  adherents  of  both  political  parties,  and 
the  struggle  up  to  this  time  had  been  carried  on 
within  these  party  lines.  This  fact  clearly  indi- 
cates that  public  opinion  had  condemned  the  fund- 
ing act  of  1871.  Subsequent  legislation  also  lends 
support  to  this  view.  But  it  will  not  answer  to 
conclude  from  this  that  a  majority  of  the  people 


176  BEPUBIATION  OF  STATE  DEBTS. 

of  Virginia  were  in  favor  during  these  years  of 
cheating  the  bondholders  out  of  their  rightful  dues. 
The  so-called  re-adjusters  of  this  period  really  in- 
cluded in  their  ranks  representatives  of  two  vicAvs. 
The  old  party,  to  which  belonged  those  who  be- 
lieved that  the  funding  act  of  1871  ought  to  remain 
as  the  final  settlement  with  the  bondholders,  had 
grown  smaller  year  by  year,  as  the  logic  of  facts 
had  demonstrated  more  and  more  clearly  that  the 
State  could  not  pay  so  heavy  an  annual  charge 
without  loading  the  people  with  too  great  a  weight 
of  taxation.^ 

All  who  did  not  belong  to  this  party  were  re- 
adjusters,  and  of  these  we  may  distinguish  two 
parties,  moderates  and  radicals.  The  former  held 
that  the  State  was  in  duty  bound  to  pay  every 
dollar  of  her  indebtedness,  accrued  interest  as  well 
as  principle,  but  that  in  view  of  her  misfortunes 
she  might  with  propriety  call  upon  tlie  bond- 
holders to  accept  a  rate  of  interest  considerably 
lower  than  that  yielded  by  the  consols  and  the 
pealers.  The  radicals  held  that  the  State  was 
under  no  obligations  to  pay  the  interest  that  had 
accrued  during  the  Civil  War  and  the  period  of 
reconstruction,  and  that  the  bondholders  ought  to 
be  given  the  alternative  of  accepting  bonds  bearing 

1  The  annual  deficit  was  at  least  $800,000  when  the  tax  rate  was 
fifty  cents  per  one  hundred  dollars.  It  would  have  required  an 
additional  levy  of  from  twenty-five  to  thirty  cents  per  one  hundred 
dollars  t6  meet  this  deficiency.  (See  Financial  Chronicle  for  Dec. 
14, 1878.) 


BEPUBIATION  IN   VIRGINIA.  177 

a  lower  rate  of  interest  and  in  amount  equal  to  the 
principal  of  the  debt  as  it  stood  at  the  outbreak  of 
the  war,  or  of  submitting  to  the  repudiation  of  all 
their  claims.  In  the  legislative  sessions  of  1878 
and  1879  the  adherents  of  these  two  views  came 
into  conflict  with  each  other,  and  with  this  the  debt 
controversy  entered  upon  a  new  phase. 

The  adverse  decisions  of  the  courts,  which  had 
practically  nullified  all  legislation  on  the  debt  ques- 
tion since  1871,  discouraged  in  the  moderates  fur- 
ther attempts  to  invalidate  the  coupons  of  the 
consols,  or  to  impair  in  any  other  way  the  funding 
act  of  that  year.  The  more  rational  plan  seemed 
to  be  to  enter  into  negotiations  with  the  bond- 
holders, with  a  view  to  inducing  them  to  accept 
a  lower  rate  of  interest  and  other  terms  more  fav- 
orable to  the  State.  Conferences  held  before  the 
legislative  session  of  1879,  and  correspondence  with 
foreign  bondholders  and  others,  revealed  a  willing- 
ness on  the  part  of  the  latter  to  accept  a  reasonable 
compromise.  Indeed,  it  was  evident  to  all  reason- 
able persons  that  a  new  funding  act  which  should 
be  acceptable  to  bondholders  and  to  the  State  alike 
was  the  only  practicable  solution  of  the  problem. 
When  the  legislature  met  in  1878,  a  proposition 
was  submitted  containing  the  terms  of  the  bond- 
holders, and  after  some  in  material  modifications  it 
was  embodied  in  the  McCulloch  bill,i  which  passed 
the  assembly  and  received  the  Governor's  signature. 

1  Acts  of  Virginia  for  1878-79,  p.  204 ;  also  Appendix  IV. 


178  REPUDIATION  OF  STATE  DEBTS. 

In  substance  this  act  provided  for  the  issue  of 
new  bonds  which  were  to  be  exchanged  for  out- 
standing bonds  doUar  for  dollar,  and  were  to 
bear  interest  at  three  per  cent  for  ten  years,  four 
per  cent  for  twenty  years,  and  five  per  cent  for  ten 
years,  making  an  average  rate  of  four  per  cent  for 
the  forty  years.  The  act  further  provided  that  all 
due  and  unpaid  interest  might  be  funded  in  the 
new  bonds  at  the  rate  of  fifty  cents  on  the 
dollar,  and  that  the  coupons  of  these  new  bonds 
should  be  receivable  for  taxes.  The  terms  of  the 
act  were  to  be  regarded  as  a  contract  between  the 
State  and  the  bondholders  on  the  conditions  ex- 
pressed in  the  following  clause :  "  The  said  corpora- 
tions may  present  for  funding  ...  at  least  eight 
millions  of  dollars  of  the  outstanding  obligations 
of  the  State  prior  to  the  first  day  of  January,  1880; 
and  during  each  period  of  six  months  from  and 
after  the  31st  day  of  December,  1879,  they  may 
present  an  additional  amount  of  at  least  five 
million  dollars,  until  the  whole  debt  is  funded. 
.  .  .  But  if  the  said  corporations  shall  fail  to  file 
with  the  Governor  their  assent  and  agreement  as 
aforesaid  by  the  first  day  of  May,  1879,  or  shall 
fail  to  present  for  funding  the  outstanding  bonds 
in  the  proportion  and  amount  and  during  the 
periods  hereinbefore  specified,  then  the  governor 
may,  in  his  discrimination,  make  a  like  contract 
with  responsible  parties  for  the  funding  of  the 
debt  by  the  State  under  this  act." 


REPUDIATION  IN    VIRGINIA.  179 

The  bondholders  at  once  complied  with  the  terms 
of  this  clause  and  eventually  funded  a  little  over 
eight  million  dollars  of  their  bonds,  thus  making 
the  new  contract  binding  upon  the  State.^ 

To  an  unprejudiced  observer  this  act  seems  to 
have  had  the  merits  of  fairness  and  practicability. 
It  satisfied  the  creditors  and  brought  the  annual  in- 
terest charge  down  to  a  figure  which  the  income  of 
the  State  at  the  time  warranted  the  people  in  con- 
cluding that  they  could  pay,  with  at  most  a  small 
increase  in  the  burden  of  taxation.  A  writer  in 
the  North  American  Review  three  years  later  said  :  ^ 
"  After  the  whole  had  been  exchanged,  the  interest 
for  the  first  ten  years  would  have  been  less  than  a 
million  dollars  a  year,  and  could  have  been  paid 
in  full  with  the  revenues  then  accruing,  which 
were  sufficient  in  addition  to  pay  all  the  expenses 
of  the  schools  and  of  the  government  in  all  its 
branches,  and  leave  a  considerable  surplus  to  be 
applied  annually  to  the  purchase  and  cancellation 
of  bonds."  ^ 

The  re-adjusters,  however,  —  and  this  title  should 
now  be  applied  only  to  the  radicals,  —  were  not  at 

1  Tenth  Census,  vol.  vii.  p,  559. 

2  See  JohnW.  Johnson's  "  Repudiation  in  Virginia"  in  North 
American  Review  for  February,  1882. 

3  This  statement  probably  presents  too  rosy  a  view  of  the  situa- 
tion. The  Governor,  in  his  message  to  the  legislature,  estimated 
that  an  additional  tax  of  ten  cemts  on  the  hundred  dollars  would 
be  needed  to  meet  the  interest  charge  imposed  by  an  act  in  sub- 
stance the  same  as  this.  —  See  Financial  Chronicle  for  Dec.  14, 
1878. 


180  REPUDIATION   OF  STATE  DEBTS. 

all  pleased  with  the  act.  They  were  obstinately 
bent  on  not  allowing  any  consultation  or  arrange- 
ment with  the  creditors,  and  were  determined  to 
go  ahead,  regardless  of  them,  and  compel  them  to 
take  whatever  measure  they  chose  to  pass.  The 
principle  at  the  basis  of  this  bill  which  recognized 
the  duty  of  the  State  to  pay  the  accrued  interest 
as  well  as  the  principal,  and  the  clause  which  made 
coupons  receivable  for  taxes,  were  both  repugnant 
to  them.  Before  the  bill  became  a  law  they  met 
in  convention  and  organized  themselves  into  a 
political  party.  Their  platform  declared  undying 
hostility  to  this  or  to  any  measure  which  did  not 
reduce  the  principal  of  the  debt.  They  entered  at 
once  upon  a  vigorous  political  campaign,  and  suc- 
ceeded by  the  November  elections  in  bringing  the 
majority  of  the  people  of  the  State  to  take  their 
view  of  the  matter.  When  the  legislature  met  in 
December,  the  re-adjusters  had  a  majority  in  both 
branches.  H.  H.  Riddleberger,  afterwards  United 
States  senator,  was  their  leader,  and  introduced 
the  famous  bill  which  bears  his  name,  and  which 
finally  won  the  adherence  of  the  people  of  Vir- 
ginia irrespective  of  party. 

In  the  preamble  of  the  bill  the  following  state- 
ment is  made :  "  It  is  confidently  believed  that  the 
people  of  this  State  will  never  acquiesce  in  any  set- 
tlement which  shall  obligate  them  and  their  poster- 
ity to  pay  ani/  part  of  the  interest  upon  the  public 
debt   which   accrued    during    the    war   and    the 


REPUDIATION  IN   VIRGINIA.  181 

period  of  reconstruction."  The  bill  enacts  that  the 
debt  shall  be  scaled  from  131,102,571  to  119,665,- 
196,  and  justifies  this  as  follows  :  The  estimated 
debt  at  the  time  of  the  passage  of  the  funding  act 
of  March  30,  1871,  included  115,025,604  of  capital- 
ized interest,  or  about  one-third  of  the  debt  as  at 
that  time  reckoned.  Not  only  was  the  debt  in  1880, 
therefore,  too  large  by  $15,025,604,  but  also  by 
the  interest  on  that  sum  which  had  accumulated 
and  been  funded.  After  going  through  a  com- 
plicated calculation  on  this  basis,  the  framers 
of  the  bill  fixed  the  true  figure  of  the  just  debt  at 
$19,665,196.  The  bill  further  stated  that  the 
State  revenues  could  not  be  pledged  in  advance, 
meaning  thereby  that  that  portion  of  the  revenues 
for  which  no  other  use  should  be  found  should  be 
devoted  to  the  payment  of  debt  obligations.  This 
bill  passed  both  branches  of  the  legislature,  but 
was  vetoed  by  the  Governor,  and  failed  to  become 
a  law  at  this  time.  One  great  purpose  of  the  re- 
adjusters  had,  however,  been  accomplished  by  the 
agitation  since  1879.  They  had  put  a  stop  to 
funding  operations  under  the  McCulloch  act,  and 
had  made  the  debt  question  the  foremost  political 
iisue  in  the  State.  The  next  campaign  was  to  be 
fought  out  on  this  line,  and  the  re-adjusters  were 
confident  of  their  ability  to  gain  control  of  the 
executive  as  well  as  the  legislature.  At  their  con- 
vention in  June.  1881,  they  declared  it  to  be  their 
purpose  to  pass  the  Riddleberger  bill  in  case  they 


182  BEPUBIATION  OF  STATE  DEBTS. 

carried  the  State,  and  they  nominated  for  lieu- 
tenant-governor an  ex-United  States  senator  who 
had  been  a  union  soldier  during  the  war  and  a 
Republican  ever  since,  and  who  was  at  the  time 
United  States  marshal  for  the  western  district  of 
Virginia.  The  Democrats  met  in  convention  a 
little  later,  declared  their  adherence  to  the  Mc- 
Culloch  bill,  and  nominated  for  State  officers  men 
in  sympathy  with  their  views.  The  Republicans 
met  in  convention  last  of  all,  and,  upon  the  advice 
of  Mr.  Mahone,  indorsed  the  ticket  of  the  re-ad- 
justers. Witli  this  accession  to  their  ranks  the 
latter  won  the  victory  at  the  elections,  and  pre- 
pared themselves  fully  to  carry  out  their  promises 
to  the  people. 

The  legislative  session  of  1882,  next  to  that  of 
1871,  was  the  most  important  in  the  history  of  the 
controversy.  During  its  passage  three  laws  were 
enacted  which  became  the  basis  for  the  future  oper- 
ations of  both  the  bondholders  and  the  re-adjusters. 
The  latter  embodied  in  these  laws  all  the  measures 
which  they  had  advocated  since  1871,  regardless 
of  the  decisions  of  the  highest  court  of  the  State 
and  of  the  Supreme  Court  of  the  United  States. 
The  first  two  of  these  acts^  are  known  as  the 
"  Coupon  killers."  One  was  passed  Jan.  14  and 
the  other  Jan.  26. 

The  former  is  entitled  "  An  act  to  prevent  frauds 
upon  the  commonwealth,  and  the  holders  of  her 

1  Acts  of  Virginia  for  1881-82,  pp.  10,  37. 


BEPUDIATION  IN   VIRGINIA.  183 

securities,  in  the  collection  and  disbursement  of 
revenues,"  and  its  preamble  reads  as  follows :  — 

"  Whereas  bonds  purporting  to  be  bonds  of  this 
commonwealth,  issued  by  authority  of  the  act  of 
March  30,  1871,  .  .  .  and  under  the  act  of  March 
28,  1879,  .  .  .  are  in  existence  without  authority 
of  law ; 

"  And  whereas  other  such  bonds  are  in  existence 
which  are  spurious,  stolen,  or  forged,  which  bonds 
bear  coupons  in  the  similitude  of  genuine  coupons, 
receivable  for  all  taxes,  debts,  and  demands  due  the 
commonwealth ; 

"  And  whereas  the  coupons  from  such  spurious, 
stolen,  or  forged  bonds  are  received  in  payment  of 
taxes,  debts,  and  demands  ; 

"  And  whereas  genuine  coupons  from  genuine 
bonds,  after  having  been  received  in  payment  of 
taxes,  debts,  and  demands  are  fraudulently  re-issued 
and  received  more  than  once  in  such  payments  ; 

"  And  whereas  such  frauds  on  the  rights  of  the 
holders  of  the  aforesaid  bonds  impair  the  contract 
made  by  the  commonwealth  with  them  that  cou- 
pons should  be  received  in  payment  of  all  taxes, 
debts,  and  demands,  and  at  the  same  time  defraud 
her  of  her  revenue  ; 

"Therefore,  for  the  purpose  of  protecting  the 
rights  of  said  bondholders,  and  of  enforcing  the 
said  contract  between  them  and  the  commonwealth, 
preventing  frauds  in  the  revenue  of  the  same, 

"  Be  it  enacted,"  etc. 


184  REPUDIATION  OF  STATE  DEBTS. 

The  bill  provides  that,  when  coupons  are  pre- 
sented in  payment  of  taxes,  the  collector  shall 
receive  them  only  for  purposes  of  identification 
and  verification  ;  that  he  shall  collect  the  tax  in 
gold  or  silver,  legal-tender  notes  or  national  bank 
notes  ;  and  that  he  shall  then  deliver  the  coupons 
to  the  court  of  the  county  or  the  city  in  which  the 
tax-payer  lives.  The  latter  shall  then  be  at  liberty 
to  bring  suit  against  the  State  for  the  purpose  of 
compelling  her  to  receive  them  in  payment  of  his 
taxes,  the  riglit  of  appeal  to  the  Circuit  Court  and 
from  that  to  the  Supreme  Court  of  Appeals  of  the 
State  being  allowed  to  both  parties.  In  case  it 
shall  be  decided  by  the  court  or  courts  that  the 
coupons  are  valid,  then  they  shall  be  received  by 
the  State  treasurer,  and  the  money  previously  paid 
refunded  to  the  tax-payer.  The  bill  further  pro- 
vides that  in  case  a  writ  of  mandamus  has  been 
applied  for  by  the  tax-payer,  its  execution  shall 
be  delayed  until  the  above-mentioned  proceedings 
before  the  courts  shall  have  been  completed. 

The  second  of  the  coupon  killer  acts  deprived 
the  tax -payer  of  the  writ  of  mandamus  or  of  any 
other  remedy  except  the  one  described  in  the  first 
act.  It  virtually  placed  before  him  the  alternative 
of  establishing  the  validity  of  his  bonds  in  the 
manner  described,  or  of  paying  his  taxes  in  the 
regular  currency  of  the  country  without  further 
ado. 

On  the  14th  of  February  the  legislature  com- 


REPUDIATION  IN   VIRGINIA.  185 

pleted  its  work  on  the  debt  question  by  the  pas- 
sage of  the  Riddleberger  act  in  substantially  the 
form  in  which  it  was  presented  in  the  session  of 
1880.1 

These  three  acts  considered  in  the  order  in  which 
they  were  passed  indicate  very  clearly  the  purpose 
of  the  re-adjusters,  and  certainly  do  credit  to  their 
ingenuity.  The  first  one,  while  purporting  to  pro- 
tect the  State  against  forged,  stolen,  and  fraudu- 
lently re-issued  coupons,  was  really  aimed  at  the 
same  goal  as  the  acts  of  1872  and  1873,  which 
were  declared  unconstitutional  by  the  courts.  It 
was  well  known  that  no  tax-payer  would  undertake 
the  risk  and  expense  of  three  lawsuits  in  order  to 
prove  the  validity  of  his  coupons.  In  many  cases 
the  expense  would  more  than  cover  their  value, 
and  in  any  case  the  tax-payer  would  have  to  take 
the  chances  of  getting  his  coupons  cashed  at  the 
treasury  after  they  had  been  declared  good  by 
the  courts.  The  second  act  simply  supplemented 
the  first  one,  and  rendered  the  case  of  the  coupon- 
holder  more  hopeless  by  denying  him  the  ordinary 
remedies  against  officers  who  refused  to  accept 
what  constituted  a  legal  payment  of  taxes.  The 
framers  of  these  bills  had  very  carefully  studied 
the  decisions  of  the  court  in  the  case  of  Antoni  v, 
Greenhow,  and  had  ingeniously  contrived  to  avoid 
the  constitutional  difficulties  which  had  wrecked 
the   acts   of   1872   and   1873.      Having,   as   they 

1  Acts  of  Virginia  for  1881-82,  p.  88;  also  Appendix  IV. 


186  REPUDIATION  OF  STATE  DEBTS. 

hoped,  completely  destroyed  by  these  acts  the 
value  of  the  coupons  heretofore  declared  receiva- 
ble for  taxes  by  the  statutes  of  the  State  and  by 
the  courts,  they  were  inclined  to  believe  that  the 
bondholders  would  accept  the  Riddleberger  act  as 
their  last  and  only  alternative.  In  this  belief, 
however,  subsequent  events  prove  them  to  have 
been  mistaken.  Comparatively  few  bonds  were 
ever  funded  according  to  the  provisions  of  the 
Riddleberger  act.  The  majority  of  the  bondhold- 
ers refused  to  accept  the  settlement  which  it 
offered,  and  proposed  to  test  in  the  courts  the  con- 
stitutionality of  the  "  coupon-killer  acts." 

In  the  prosecution  of  this  purpose  the  celebrated 
"  Virginia  coupon  cases  "  ^  were  brought  before  our 
Supreme  Court,  and  a  number  of  decisions  elicited 
which  are  exceedingly  important  on  account  of 
their  bearing  on  several  vexed  questions  of  con- 
stitutional law,  as  well  as  on  the  debt  question. 
There  are  nine  of  these  cases,  all  but  one  of  which, 
however,  are  covered  by  two  decisions,  the  first 
one  delivered  in  the  case  of  Antoni  v.  Greenhow  ^ 
in  March,  1883,  and  the  other  in  the  case  of  Poin- 
dexter  v,  Greenhow  ^  in  April,  1885. 

1  Several  other  cases  involving  the  same  points  and  decided  in 
the  same  way  came  before  the  Supreme  Court  of  the  United  States 
in  February,  1886;  namely,  Barry  v.  Edmunds,  116  U.  S.,  550; 
Claffin  V.  Taylor,  116  U.  S.,  567;  Royall  v.  Virginia,  116  U.  S., 
572;  and  Sands  v.  Edmunds,  116  U.  S.,  585. 

2  107  U.  S,,  769. 
8  114  U.  S.,  270. 


REPUDIATION  IN   VIRGINIA.  187 

The  case  of  Antoni  v.  Greenhow  is  as  follows : 
In  March,  1882,  Andrew  Antoni  tendered  for  taxes 
a  coupon  of  1871,  and,  when  the  collector  refused 
to  accept  it  as  payment,  applied  to  a  State  Court 
for  a  mandamus.  The  judges  of  this  court  could 
not  decide  the  question  on  account  of  a  tie  vote, 
and  the  case  was  appealed  to  the  Supreme  Court 
of  the  United  States.  Chief  Justice  Waite  deliv- 
ered the  opinion  of  the  majority  of  the  court,  and 
held  that,  in  accordance  with  the  principle  laid 
doAvn  in  the  case  of  Hartman  v.  Greenhow,  the 
State  was  bound  to  accept  these  coupons,  but  forth- 
with added  that  "so  long  as  the  State  legislature 
did  not  impair  any  substantial  contract,  it  could 
change  the  form  of  the  remedy,  and  that  the  right 
to  appeal  to  the  State  Court  for  adjudication  upon 
the  validity  of  the  coupon  left  to  the  creditor  an 
adequate  remedy."  "  No  attempt  has  been  made," 
said  Chief  Justice  Waite,  "to  fix  definitely  the 
line  between  alterations  of  the  remedy  which  are 
deemed  legitimate,  and  those  which,  under  the 
form  of  modifying  the  remedy,  impair  substantial 
rights.  ...  In  all  such  cases  the  question  becomes, 
therefore,  one  of  reasonableness,  and  of  that  the 
legislature  is  primarily  the  judge."  Further  on 
the  judge  explains  his  meaning  more  fully  in  the 
following  words :  "  It  matters  not  whether  the 
coupons  have  been  refused  for  the  taxes,  if  full 
payment  of  the  amount  that  they  call  for  is  actu- 
ally made  in  money.     A  remedy,  therefore,  which 


188  BEPUDIATION  OF  STATE  DEBTS. 

is  ample  for  the  enforcement  of  the  payment  of 
the  money,  is  ample  for  all  the  purposes  of  the 
contract.  That,  we  think,  is  given  by  the  act  of 
1882  in  both  forms  of  proceeding." 

Three  of  the  Justices  dissented  from  this  opin- 
ion, but  it  remained  the  law  of  the  Supreme  Court, 
and  future  cases  were  decided  in  accordance  with 
it.  The  readjusters  regarded  this  opinion  as  an 
important  victory  for  them,  but,  since  the  point 
involved  in  this  case  pertained  simply  to  the  right 
of  a  tax-payer  to  receive  a  writ  of  mandamus  com- 
pelling the  tax-collector  to  receive  his  coupons  in 
payment  of  taxes  before  he  had  established  their 
validity  in  the  manner  described  by  law,  it  did  not 
affect  the  tax-receivable  character  of  the  coupons, 
and  it  still  left  to  the  bondholder  an  opportunity 
to  force  their  acceptance  by  another  method  of 
procedure ;  namely,  by  refusing  to  pay,  after  having 
tendered  coupons,  and  then  applying  for  an  injunc- 
tion in  case  the  collector  levied  upon  his  property, 
or  by  bringing  suit  for  the  recovery  of  his  property 
in  case  it  had  been  attached.  This  method  of 
procedure  was  made  effective  by  the  Supreme 
Court  in  the  case  of  Poindexter  v.  Greenhow. 
Before  describing  this  decision,  however,  we  must 
take  note  of  the  further  attempts,  made  in  the 
legislative  session  of  1884,  to  render  these  coupons 
worthless. 

Four  acts  were  passed  by  this  legislature  having 
this  object  in  view.     They  were  approved  respect- 


MEPUBIATION  IN  VIRGINIA,  189 

ively  on  March  12,  13, 15  and  19.^  The  first  made 
it  the  duty  of  the  attorney  for  the  commonwealth 
to  defend  all  suits  brought  by  tax-payers,  and,  in 
case  they  were  decided  against  the  State,  to  appeal 
them  from  one  court  to  another  so  long  as  that 
was  possible.  The  second  one  deprived  the  tax- 
payer of  the  right  to  bring  an  action  for  trespass 
against  a  tax-collector  who  should  levy  upon  his 
property  after  he  had  tendered  coupons  and  re- 
fused to  pay  in  currency.  The  third  act  declared 
that  no  person  should  sell  tax-receivable  coupons 
without  a  special  license,  the  fee  for  which  should 
be  f  1,000  for  each  business  place  kept  open  for  that 
purpose,  and  twenty  per  cent  of  the  face  value  of 
all  coupons  sold.  The  act  of  March  19  required 
that  in  the  case  of  all  coupons  received  for  taxes, 
a  sum  equal  in  amount  to  the  difference  between 
said  coupons  and  the  coupons  of  corresponding 
Riddleberger  bonds  for  which  they  might  have 
been  exchanged  should  be  charged  to  the  bonds 
from  which  they  we're  cut  as  payment  on  the 
principal. 

The  eight  coupon  cases  decided  in  April,  1885, 
involved  some  of  these  laws,  as  well  as  the  so- 
called  "  coupon-killers  "  previously  described.  The 
decision  in  Poindexter  v.  Greenhow  gives  us  the 
opinion  of  the  court  on  most  of  these  laws. 

Mr.  Poindexter  tendered  coupons  in  payment  of 
taxes  to  collector  Greenhow  of  the  city  of  Rich- 

1  Acts  of  Virginia  for  1883-84,  pp.  504,  527,  590,  and  721. 


190  BEPUDIATION  OF  STATE  DEBTS. 

mond,  and  upon  the  latter's  refusal  to  receive 
them  except  for  identification  and  verification,  he 
refused  to  pay  the  tax  in  currency  as  the  act  of 
Jan.  14,  1882,  required.  Collector  Greenhow,  in 
obedience  to  another  law,  levied  upon  the  property 
of  Mr.  Poindexter  to  satisfy  the  tax  claim.  Suit 
was  then  brought  for  recovery  of  the  property, 
Poindexter  claiming  that  the  tender  of  his  coupons 
constituted  a  legal  payment  of  his  taxes.  Mr. 
Justice  Matthews  delivered  the  opinion  of  the 
court,  and  on  the  points  at  issue  made  the  follow- 
ing statements :  "  The  act  of  the  General  Assem- 
bly of  Virginia  of  Jan.  26,  1882,  '  to  provide  for 
the  more  efficient  collection  of  the  revenue  to  sup- 
port government,  maintain  the  public  schools,  and 
pay  interest  on  the  public  debt,'  requiring  tax- 
collectors  to  receive  in  discharge  of  the  taxes, 
license  taxes,  and  other  dues,  gold,  silver.  United 
States  treasury  notes,  national  bank  currency,  and 
nothing  else,  and  thereby  forbidding  the  receipt  of 
coupons  issued  under  the  act  of  March  30,  1871, 
in  payment  therefor,  although  it  is  a  legislative 
act  of  the  government  of  Virginia,  is  not  a  law  of 
the  State  of  Virginia,  because  it  impairs  the  obliga- 
tion of  its  contract,  and  is  annulled  by  the  Consti- 
tution of  the  United  States. 

"  The  State  has  passed  no  such  law,  for  it  can- 
not; and  what  it  cannot  do  in  contemplation  of  law 
it  has  not  done.  The  Constitution  of  the  United 
States  and  its  own  contract,  both  irrepealable  by 


EEPUDIATION  IN  VIRGINIA.  191 

any  act  on  its  part,  are  the  laws  of  Virginia,  and 
that  law  made  it  the  duty  of  the  defendant  to  re- 
ceive the  coupons  tendered  in  payment  of  taxes, 
and  declared  every  step  to  enforce  the  tax  there- 
after taken  to  be  without  warrant  of  law,  and 
therefore  a  wrong.  This  strips  the  defendant  of 
his  official  character  and  convicts  him  of  a  per- 
sonal violation  of  the  plaintiff's  rights,  for  whicli 
he  must  personally  answ^er." 

This  decision  practically  annulled  most  of  the 
obstructive  legislation  of  1882  and  subsequently, 
inasmuch  as  it  protected  coupon-holders  against 
attacks  on  their  property  for  the  satisfaction  of 
tax  claims  after  they  had  tendered  coupons  in 
payment  of  their  taxes.  It  mattered  not  to  the 
tax-payer  that  his  coupons  were  not  accepted,  if, 
after  their  tender  for  taxes,  he  could  not  be  forced 
to  pay  in  money.  It  did  not,  however,  dismay 
the  legislators.  They  seemed  bent  on  legislating 
against  the  coupons,  even  though  their  previous 
attempts  to  kill  them  had  been  ignominious  fail- 
ures. In  the  legislative  sessions  of  1886  and  1887 
another  batch  of  laws  was  enacted,  designed  to 
impose  obstructions  and  impediments  in  the  way 
of  using  the  tax-receivable  coupons.  One  of  these 
acts  ^  provided  that  expert  evidence  to  prove  the 
genuineness  of  coupons  could  not  be  employed. 
Another  2  that,    when    required,    the    bond   from 

1  Acts  of  Virginia  for  1885-86,  p.  36. 

2  Ibid.,  p.  40.     ■ 


192  BEPUBIATION  OF  STATE  DEBTS. 

which  the  coupon  was  alleged  to  have  been  clipped 
must  be, produced,  and  the  fact  that  the  coupon 
was  actually  clipped  from  it  established  as  absolute 
proof  of  its  genuineness .1  A  third  act  made  it  a 
crime,  punishable  by  fine  and  imprisonment,  for 
any  person  by  oral  representation,  writing,  or 
printing  to  solicit  or  induce  any  suit  or  action 
against  the  State  of  Virginia.  Still  another  act  ^ 
provided  that  petitions  for  proceedings  for  the 
purpose  of  testing  the  genuineness  of  coupons 
must  be  filed  within  a  year  after  the  coupons  fall 
due.  The  last  of  these  acts  was  passed  May  12, 
1887.^  According  to  the  decisions  of  the  Supreme 
Court  in  1885  and  1886,  collecting  officers  were 
liable  for  punishment  for  proceeding  against  a  per- 
son who  had  tendered  coupons  in  payment  of 
taxes.  This  act  was  intended  to  shield  these 
officers,  and  accordingly  it  authorized  suits  to  be 
brought  against  such  tax-payers  in  the  name  of 
the  commonwealth,  and  to  be  commenced  by  the 
serving  of  a  notice  on  the  party  liable  for  the  tax, 
or  on  his  agent. 

These  acts  were  brought  for  review  before  the 
Supreme  Court  of  the  United  States  by  a  number 
of  cases  presented  in  the  October  term  of  1889.* 
After  reviewing    this    and    previous    legislation 


1  Acts  of  Virginia  for  1885-86,  p.  384. 

2  Ibid.,  p.  312. 

3  Ibid.,  1887,  p.  257. 

*  See  McGahey  v.  Virginia,  136  U.S.,  667. 


HEPUDIATION  IN  VIRGINIA.  198 

aimed  at  rendering  the  coupons  useless,  the  court 
said :  "  The  various  acts  of  the  Assembly  of  Vir- 
ginia passed  for  the  purpose  of  restraining  the  use 
of  said  coupons  for  the  payment  of  taxes  and  other 
dues  to  the  State,  and  imposing  impediments  and 
obstructions  to  that  use  and  to  the  proceedings 
instituted  for  establishing  their  genuineness,  do  in 
many  respects  materially  impair  the  obligation  of 
that  contract,  and  cannot  be  held  to  be  valid  or 
binding  in  so  far  as  they  have  that  effect."  The 
court  Avas  obliged  to  say,  however,  that  the  State 
had  a  riglit  to  test  the  validity  of  coupons,  and 
that  on  account  of  the  eleventh  amendment  to  the 
constitution  of  the  United  States,  individuals 
were  estopped  from  bringing  suits  against  the 
State,  even  in  case  they  thought  their  rights  had 
been  seriously  infringed.  The  decision,  therefore, 
did  not  nullify  or  weaken  the  act  of  May  12, 
1887. 

Since  1889  the  State  has  brought  hundreds  of 
suits  against  tax-payers  who  have  presented  cou- 
pons in  discharge  of  their  obligations.^  Very 
often  the  latter  have  been  able  to  meet  all  the 
requirements  for  establishing  the  validity  of  their 
coupons,  and  thus  to  force  the  State  to  accept 
them ;  but  in  the  majority  of  cases  probably  the 
requirements  could  not  be  met  and  the  coupons 
were  rejected.  At  any  rate,  tlie  number  of  coupons 
received  at  the  treasury  during  the  years  1889  and 

1  See  Financial  Chronicle  for  Jan.  5, 1889. 


194  REPUDIATION  OF  STATE  DEBTS. 

1890  were  insignificant  compared  with  the  number 
which  were  presented.  ^ 

Notwithstanding  all  this  hostile  legislation,  tha 
majority  of  the  people  of  Virginia  have  for  a  long 
time  honestly  desired  a  settlement  of  the  debt 
question  which  would  satisfy  all  parties  concerned. 
They  have  appreciated  the  injury  to  the  State's 
credit  and  the  hindrance  to  her  industrial  progress 
which  the  long  controversy  has  occasioned,  and 
have  been  eager  to  bring  it  to  a  close.  No  better 
proof  of  this  is  needed  than  the  legislation  of  the 
General  Assembly  which  met  in  December,  1891, 
and  adjourned  in  March,  1892,  and  the  events 
which  preceded  it. 

March  5,  1890,  the  General  Assembly  selected 
by  joint  resolution  a  debt  commission  to  receive 
proposals  for  funding  the  debt,  and  instructed  its 
members  to  make  an  agreement  with  the  bond- 
holders on  the  basis  of  the  principles  laid  down 
in  the  Riddleberger  bill.  The  commission  met  a 
committee  of  the  bondholders  June  2,  1891,  and 
again  on  Nov.  17,  and,  after  much  discussion, 
made  the  following  agreement:  "We  will  recom- 
mend (to  the  legislature)  a  proposition  to  issue  a 
maximum  amount  of  f  19,000,000  to  be  exchanged 
for  outstanding  obligations  of  the  State  mentioned 

1  Coupons  were  received  at  the  treasury  as  follows :  — 

1883  ..    .    $40,540  1887    .     .     .    $81,020 

1884  .     .     .    172,997  1888    .    .     .     258,938 

1885  .     .     .      50,164  1889    .     .     .     214,580 

1886  .     .     .      56,180  1890    .     .     .     116,782 


REPUDIATION  IN   VIRGINIA.  195 

in  the  Riddleberger  act  (other  than  those  held  by 
schools  and  colleges)  now  in  the  hands  of  the  pub- 
lic, but  not  including  bonds  already  funded  under 
this  act,  such  new  bonds  to  run  for  one  hundred 
yeai-s,  and  to  bear  two  per  cent  interest  for  ten 
years,  and  three  per  cent  interest  for  ninety  years. 
The  bonds  and  interest  obligations  shall  be  of  the 
same  general  character  as  those  provided  by  the 
Riddleberger  bill,  and  it  is  distinctly  understood 
that  the  coupons  or  other  interest  obligations  are 
not  to  be  receivable  for  taxes.  The  proposed  new 
bonds  shall  be  exchangeable  for  the  outstanding 
obligations  aforesaid  in  the  proportion  of  nineteen 
of  the  former  for  twenty-eight  of  the  latter.  This 
recommendation  is  of  course  to  be  conditional  on 
the  understanding  that  your  committee  hold  and 
has  the  authority  to  exchange  the  obligations 
mentioned  in  the  previous  communication  to  us, 
amounting  to  at  least  823,000,000." 

The  bondholders'  committee  accepted  these 
terms,  and  assumed  the  obligation  of  presenting 
for  funding  under  the  new  arrangement  the  amount 
of  bonds  mentioned. 

The  report  of  the  commission,  together  with 
the  message  from  the  Governor,  was  presented  to 
the  legislature  on  Jan.  14,  1892,  and  its  chief 
recommendations  were  embodied  in  a  bill  which 
passed  the  General  Assembly  Feb.  18.^ 

In  his  message  the  Governor  showed  that  the 

1  Acts  of  Virginia  for  1891-92,  p.  533. 


196  BEPUDIATION  OF  STATE  DEBTS. 

proposed  settlement  was  more  favorable  to  the 
State  than  any  which  had  been  offered,  and  that 
the  interest  charge  which  it  involved  could  be 
met  without  any  increase  in  the  rate  of  taxation.^ 
The  new  bill  provides  for  a  sinking  fund  of  one- 
half  per  cent  in  the  year  1910,  which  is  to  be 
increased  to  one  per  cent  in  1930,  and  it  gives 
the  State  the  right  to  redeem  the  new  issue  after 
the  year  1906.  Unless  some  unforeseen  calamity 
intervenes,  there  is  every  reason  for  believing  that 
this  will  constitute  a  final  settlement  of  the  long- 
continued  debt  controversy .2 

1  According  to  the  Governor,  the  annual  interest  charge  under 
the  proposed  settlement  will  be  $502,437.27,  while  the  interest 
charge  imposed  by  the  Riddleberger  act  was  $633,686.53 ;  that  im- 
posed by  the  McCulloch  act  was  $1,240,083.35;  and  that  imposed 
by  the  funding  act  of  1871  was  $1,899,450.90. 

2  The  time  during  which  bondholders  were  permitted  to  de- 
posit their  bonds  with  the  Sinking  Fund  Commissioners  for  set- 
tlement according  to  the  terms  of  the  act  of  Feb.  20  expired 
Dec.  31,  1892.  At  that  time  only  a  small  percentage  of  the  whole 
amount  outstanding  had  not  been  deposited.  These  bonds,  accord- 
ing to  the  act,  are  outlawed,  and  cannot  be  revived  except  by  act 
of  the  legislature.  —  Financial  Chronicle,  Dec.  24, 1892. 


VII. 

THE  CAUSES  OF   REPUDIATION. 


CHAPTER  VII. 

THE  CAUSES   OF   REPUDIATION. 

The  phase  of  financial  history  which  has  been 
described  with  considerable  detail  in  the  preceding 
chapters  must  now  be  viewed  as  a  problem  for  solu- 
tion. We  have  stated  the  facts,  and  we  must  now 
seek  their  explanation.  The  universality  of  the 
repudiation  movement  in  the  South,  and  the  fact 
that  in  all  but  two  cases  it  appeared  in  each  of  the 
States  affected  at  nearly  the  same  time,  suggest 
common  causes,  and  invite  an  investigation  below 
the  surface  of  the  facts  which  have  been  presented. 
It  is  only  when  we  view  the  facts  as  one  whole  and 
attempt  their  classification  and  analysis  that  their 
true  meaning  and  explanation  become  apparent. 
It  is  the  purpose  of  the  present  chapter  to  reveal 
the  general  causes  of  repudiation,  and  to  determine 
their  permanent  or  adventitious  character. 

As  a  rule,  the  repudiating  States  have  attempted 
to  shield  their  honor  behind  the  bulwark  of  the 
law.  Only  in  one  or  two  cases  have  they  let  their 
debts  go  by  default  without  so  much  as  attempting 
a  legal  justification  of  their  acts.     We  have  seen 

199 


200  EEPUBIATION  OF  STATE  DEBTS. 

that  in  some  cases  the  alleged  illegality  of  the  bonds 
repudiated  was  a  mere  pretext,  without  any  real 
foundation  in  fact ;  but  that  in  others  the  allegations 
were  true.  Of  this  latter  class  of  cases  Arkansas, 
Georgia,  and  South  Carolina  furnish  us  with  exam- 
ples. In  the  first-mentioned  State  the  ayes  and 
nays  had  not  been  recorded  in  the  case  of  the  law 
authorizing  some  of  her  bonds,  whereas  her  con- 
stitution expressly  provided  that  they  should  be 
recorded.  A  subsequent  act  of  the  legislature 
deprived  the  State  of  all  moral  justification  for 
repudiation,  but  could  not  affect  the  constitution- 
ality of  it. 

In  the  issue  of  the  railroad  bonds  which  Georgia 
had  indorsed,  and  was  called  upon  to  pay,  a  vari- 
ety of  irregularities  had  been  practised.  Those 
issued  to  the  Alabama  and  Chattanooga  Railroad 
were  second  mortgage  bonds,  and  the  constitution 
provided  that  the  State's  indorsement  should  be 
placed  only  upon  first  mortgage  bonds.  The  act 
authorizing  the  State's  indorsement  of  the  bonds 
of  the  Bainbridge,  Cuthbert,  and  Columbus  Rail- 
road provided  as  a  condition  of  such  indorsement 
that  twenty  miles  of  said  road  should  first  be  com- 
pleted. As  a  matter  of  fact,  however,  not  a  foot 
of  the  road  was  ever  built,  while  the  bonds  were 
issued,  indorsed,  and  negotiated.  As  a  condition 
of  the  issue  of  bonds  in  aid  of  the  Cartersville 
and  Van  Wirt  Railroad,  the  act  provided  that  an 
equal  amount  must  be  invested  by  private  parties. 


THE  CAUSES  OF  REPUDIATION.  201 

Legislative  investigation  showed,  however,  that 
the  bonds  had  been  issued  in  entire  disregard  of 
this  clause  of  the  law.  The  name  of  the  Carters- 
ville  and  Van  Wirt  Railroad  was  changed  to  that 
of  the  Cherokee  Railroad,  and  new  bonds  were 
issued  to  it  under  the  new  name,  though  all  that 
the  law  authorized  had  been  issued  to  the  road 
under  the  old  name. 

The  illegality  discovered  in  South  Carolina  con- 
sisted in  one  case  in  the  issue  of  $2,000,000  of 
bonds  under  an  act  which  authorized  the  issue 
of  only  $1,000,000,  and  in  another  case  in  the 
unconstitutionality  of  an  act  passed  for  the  relief 
of  the  treasury. 1 

For  the  purpose  of  our  investigation  into  the 
legal  justification  of  the  States  in  the  repudiation 
of  these  and  similar  issues,  they  may  be  classified 
under  the  following  heads  :  — 

1.  Those  which  were  not  authorized  by  any  law. 

2.  Those  which  were  authorized  by  laws  which 
were  unconstitutional. 

3.  Those  in  which  the  law^s  authorizing  them 
had  not  been  strictly  complied  with. 

The  point  to  be  decided  in  each  of  these  cases  is 
whether  the  State  or  innocent  bondholders  should 
have  been  made  to  suffer  any  loss  that  the  illegal- 
ity in  question  entailed.  In  cases  in  which  a  State 
is  one  of  the  parties  we  have  very  few  legal  decis- 
ions to  guide  us  to  the  opinions  of  the  courts  on 
1  See  page  91. 


202  BEPUBIATION  OF  STATE  DEBTS. 

this  point,  for  very  few  such  questions  have  been 
adjudicated,  owing  to  the  immunity  of  States  from 
suits  brought  by  individuals.  Cases  of  municipal 
bonds  precisely  similar,  however,  have  been  re- 
peatedly tried  in  the  courts,  and  from  these  we 
may  discover  the  law  upon  the  subject. 

Cases  coming  under  the  first  of  the  above  heads 
are  easy  to  decide.  No  court  would  hold  a  State 
responsible  for  bonds  for  the  issue  of  which  she 
had  given  no  authority  whatever.  Purchasers  are 
bound  to  see  to  it  that  the  bonds  in  which  they 
invest  have  been  authorized  by  law.  To  fail  here 
is  a  negligence  for  which  they  alone  are  responsible, 
and  for  which  they  must  and  should  suffer.  Of 
course  an  action  for  fraud  might  be  brought  against 
State  officers  who  would  presume  to  negotiate  such 
bonds  ;  but  such  an  action  would  concern  them  as 
individuals,  and  not  as  State  officials.  The  author- 
ity of  the  State's  agents  is  of  necessity  defined  by 
law,  and  the  interests  of  good  order  and  careful 
legislation,  as  well  as  the  safeguards  of  liberty, 
demand  that  these  laws  should  be  strictly  obeyed. 

On  this  point  BuiToughs,  on  "  The  Law  of  Public 
Securities,"  p.  5,  says :  "  All  who  deal  with  a  pub- 
lic agent  or  officer  must  take  notice  of  his  powers. 
He  derives  his  authority  from  the  law  which 
authorizes  his  appointment.  No  person  may  pro- 
fess ignorance  of  the  extent  of  the  powers  of  a 
public  agent.  (State  v.  Hays,  53  Mo.,  578).  A 
private  agent  acting  in  violation  of  specific  instruc- 


THE  CAUSES  OF  REPUDIATION.  203 

tions,  yet  within  the  scope  of  a  general  authority, 
may  bind  his  principal ;  the  rule  as  to  the  effect  of 
a  like  act  of  a  public  agent  is  otherwise.  The 
latter  is  clothed  with  duties  and  powers  specifically 
defined  and  limited  by  public  law,  ignorance  of 
wliich  cannot  be  presumed  in  favor  of  those  deal- 
ing with  him.  This  is  the  reason  of  the  difference 
between  public  and  private  agents.  The  powers 
of  the  one  can  always  be  known ;  the  other  may 
not  be." 

Cases  in  which  the  law  authorizing  the  issue 
is  unconstitutional  are  more  complicated.  The 
decision  is  easy  and  simple,  provided  the  law  is 
declared  by  competent  authority  to  be  unconstitu- 
tional before  the  bonds  are  negotiated.  Such  a 
case  w^ould  really  belong  under  the  first  head,  for 
a  law  which  has  been  declared  unconstitutional  has 
no  more  binding  force  than  if  it  had  never  been 
passed.  But  suppose  the  bonds  have  been  regu- 
larly and  properly  negotiated,  and  have  come  into 
the  hands  of  innocent  purchasers,  before  the  con- 
stitutionality of  the  law  authorizing  them  has  been 
questioned ;  and  suppose  further  that  the  law, 
though  plainly  unconstitutional,  has  not  been 
declared  so  by  competent  authority.  It  was  under 
precisely  such  conditions  as  these  that  the  repudi- 
ated unconstitutional  bonds  were  issued.  Are 
purchasers  of  bonds  bound  to  consult  the  records 
in  order  to  discover  whether  or  not  the  constitution 
has  been  complied  with  in  the  passage  of  the  law, 


204  BEPUDIATION  OF  STATE  DEBTS. 

or  is  it  sufficient  for  them  to  see  to  it  that  there 
is  a  law  authorizing  the  bonds  which  they  have 
purchased  ? 

It  must  be  admitted  that  the  answer  to  this 
question  is  not  easy.  On  the  one  hand,  it  may  be 
asked  of  what  good  are  constitutions  unless  the 
State  insists  upon  their  being  complied  with  to 
the  letter ;  and  on  the  other  hand,  it  may  be  asked 
whether  the  State  is  not  estopped  from  pleading 
the  unconstitutionality  of  a  law  by  the  action  of 
her  officers  who  negotiated  the  bonds,  and  by  that 
act  certified  to  their  validity. 

At  this  point  it  becomes  necessary  to  distinguish 
carefully  between  the  second  and  third  classes  of 
cases  into  which  illegal  bonds  are  classified, — in 
other  words,  between  violations  of  a  constitution 
and  of  a  statute  law.  In  the  latter  class  of  cases, 
as  we  shall  presently  show,  the  ordinary  executive 
officers  of  the  State  are  competent  to  decide 
whether  or  not  the  law  has  been  complied  with ; 
in  the  former  class  of  cases  they  are  not.  The 
power  to  decide  concerning  the  constitutionality  of 
a  law,  in  all  the  States  of  our  Union,  has  been  con- 
ferred upon  some  court,  and  that  court  cannot,  in 
the  nature  of  the  case,  pronounce  a  decision  until 
some  case  has  been  brought  before  it,  and  that  may 
not  happen  until  years  after  the  bonds  have  been 
negotiated  and  have  passed  into  the  hands  of  inno- 
cent holders.  Unless,  after  a  law  has  been  pro- 
nounced unconstitutional  by  competent  authority, 


THE  CAUSES  OF  REPUDIATION.  205 

it  becomes  of  none  effect,  and  all  acts  based  upon 
it  lose  their  binding  force,  it  is  difficult  to  see 
how  constitutions  render  any  protection  to  people 
of  the  State.  The  preservation  intact  of  the  pro- 
tective character  of  the  fundamental  law  of  a 
State  seems,  therefore,  to  demand  that,  in  the  class 
of  cases  under  discussion,  the  bondholders  shall 
suffer  the  loss,  unless  other  more  important  inter- 
ests of  the  State  are  thereby  jeopardized.  The 
State  constitution  is  a  part  of  the  law  which  de- 
fines the  duties  of  officers,  and  purchasers  of  bonds 
are  bound  to  see  to  it,  not  only  that  their  purchases 
are  authorized  by  a  statute  law,  but  that  such  a 
law  does  not  conflict  with  the  constitution  of  the 
State.  The  law  relating  to  this  point  is  summar- 
ized in  "  Law  of  Public  Securities,"  by  Burroughs, 
in  the  following  words :  "  The  defects  of  want 
of  power  arising  from  a  violation  of  some  consti- 
tutional provision  are,  however,  of  such  a  charac- 
ter that  no  defence  avails  the  holder.  That  he  has 
paid  value  for  the  bonds  in  good  faith,  and  has  no 
actual  notice  of  the  defect,  is  immaterial.  Every 
person  is  bound  to  know  the  law,  statute  and 
constitutional,  and  this  constructive  notice  is  as 
effectal  as  an  actual  notice." 

The  third  class  of  cases  mentioned  above  brings 
to  our  attention  irregularities  in  the  compliance 
with  laws  authorizing  the  issue  of  bonds.  The 
number  of  these  is  great ;  but  one  principle  has 
directed  decisions  on  such  points  in  the  case  of 


206  BEPUDIATION  OF  STATE  DEBTS. 

municipal  bonds,  and  that  alone  needs  to  be  con- 
sidered. The  question  to  be  decided  in  these 
cases  is,  whether  the  holders  need  to  go  back 
of  the  recitals  on  the  bonds,  in  case  such  recitals 
state  that  the  law  has  been  complied  with.  The 
first  case  brought  before  the  Supreme  Court  of 
the  United  States  involving  this  question  was 
that  of  Knox  County,  Indiana,  v.  Aspinwall, 
et  al^  Since  this  furnished  the  precedent  which 
has  been  closely  followed  by  that  court,  it  will 
be  worth  while  to  give  an  account  of  it. 

This  county  refused  to  pay  bonds  that  had  been 
issued  in  aid  of  a  railroad  on  the  ground  that  the 
county  commissioners  who  issued  them  had  failed 
to  comply  with  that  clause  of  the  statute  which 
required  that  certain  notices  be  given  before  the 
matter  was  put  to  a  vote  of  the  people.  The  fol- 
lowing is  the  opinion  of  the  court :  "  Where  the 
statute  of  a  State  provided  that  the  Board  of  Com- 
missioners of  a  county  should  have  power  to  sub- 
scribe for  railroad  stock,  and  issue  bonds  therefor 
in  case  a  majority  of  the  voters  of  the  county 
should  so  determine  after  a  certain  notice  should 
be  given  of  the  time  and  place  of  election,  and 
the  Board  subscribed  for  the  stock  and  issued  the 
bonds,  purporting  to  act  in  compliance  with  the 
statute,  it  is  too  late  to  call  in  question  the  exist- 
ence or  regularity  of  the  notices  in  a  suit  against 
them  by  the  holders  of  the  coupons  attached  to  the 


THE  CAUSES  OF  REPUDIATION.  207 

bonds,  who  are  innocent  holders  in  this  collateral 
way.  In  such  a  suit,  according  to  the  true  inter- 
pretation of  the  statute,  the  Board  were  the  proper 
judges  whether  or  not  a  majority  of  the  votes  in  the 
county  had  been  cast  in  favor  of  the  subscription 
to  the  stock.  The  bonds  on  their  face  import  a 
compliance  with  the  law  under  which  they  were 
issued,  and  the  purchaser  was  not  bound  to  look 
further  for  evidence  of  a  compliance  with  the 
conditions  to  the  grant  of  the  power." 

In  the  case  of  Colona  v.  Eaves,  92  U.  S'.  484, 
Mr.  Justice  Strong  confirmed  the  decision  in  the 
case  of  Knox  County,  etc.,  in  the  following 
words :  "  Where  the  legislative  authority  has  been 
given  a  municipality,  or  to  its  officers,  to  subscribe 
for  the  stock  of  a  railroad  company,  and  to  issue 
municipal  bonds  in  payment,  but  only  on  some 
precedent  condition,  such  as  a  popular  vote  favor- 
ing the  subscription,  and  where  it  may  be  gathered 
from  the  legislative  enactment  that  the  officers  of 
the  municipality  were  invested  with  power  to 
decide  whether  the  condition  precedent  had  been 
complied  with,  their  recital  that  it  has  been,  made 
in  the  bonds  issued  by  them,  and  held  by  a  bona 
fide  purchaser,  is  conclusive  of  the  fact  and  bind- 
ing upon  the  municipality,  for  the  recital  is 
itself  a  decision  of  the  fact  by  the  appointed 
tribunal." 

Mr.  Justice  Bradley,  in  Humboldt  Township  v. 
Long,  etal,  92  U.  S.  642,  says:  "We  have  sub- 

**  of        '    ' 


208  BEPVBIATION  OF  STATE  DEBTS. 

stantially  held  that  if  a  municipal  body  has  law- 
ful power  to  issue  bonds  or  other  negotiable 
securities,  dependent  only  on  the  adoption  of 
certain  preliminary  proceedings,  such  as  a  popular 
election  of  the  constituent  body,  the  holder  in 
good  faith  has  a  right  to  assume  that  such  pre- 
liminary proceedings  have  taken  place,  if  the  fact 
be  certified  on  the  bonds  themselves  by  the 
authorities  whose  primary  duty  it  is  to  ascer- 
tain it." 

Another  case  bearing  upon  the  rights  of  bona  fide 
bondholders  was  that  of  Hackett  v.  Ottawa,  99 
U.  S.  86.  In  this  it  was  shown  that  the  bonds 
had  not  been  issued  for  the  purpose  prescribed  in 
the  act.  The  court  held  that  in  this  case  the 
bondholder  was  not  compelled  to  go  back  of  the 
recitals  on  the  bonds.  It  said  in  substance  that 
when  the  officers  of  a  municipality  recite  in  bonds 
issued  by  them  that  they  are  for  a  purpose  muni- 
cipal or  public,  this  recital  cuts  off  all  in- 
quiry as  to  the  purpose  for  which  they  were 
issued. 

In  another  case  Chief  Justice  Waite  said: 
"When  the  certificate  of  the  proper  officer  is 
found  on  the  bond,  the  purchaser  need  not  inquire 
whether  what  has  been  certified  to  is  true.  As 
against  a  bona  fide  holder,  the  public  is  bound 
by  what  its  authorized  agents  have  done  and  stated 
in  the  prescribed  form."  ^ 

1  Antony  v.  County  of  Jasper,  101 U.  S.  693. 


THE  CAUSES  OF  REPUDIATION.  209 

Our  State  courts  have,  in  the  main,  followed 
the  principle  laid  down  in  these  decisions,  though 
they  have  not  given  quite  so  broad  an  interpreta- 
tion to  the  term  "irregularities."  ^  A  distinction 
must,  of  course,  be  made  between  mere  irregular- 
ities in  compliance  with  the  law  and  acts  which 
fall  entirely  outside  of  the  authorization  of  the 
law. 

These  decisions  certainly  warrant  us  in  conclud- 
ing that  officers  authorized  to  issue  bonds  have 
power  to  determine  that  the  conditions  of  the 
law  have  been  complied  with;  that  the  decision 
of  such  officers  to  that  effect  is  binding  upon  the 
State;  and  that  the  recitals  of  the  bonds  duly 
signed  by  such  officers  that  said  conditions  have 
been  complied  with,  is  the  only  evidence  which 
the  bondholder  must  produce  in  order  to  establish 
the  validity  of  his  bonds. 

If  the  specific  cases  of  repudiation  on  the 
grounds  of  illegality  described  in  preceding 
pages  be  adjudged  in  accordance  with  the  prin- 
ciples of  the  law  here  laid  down,  it  will  be  found 
that  some  of  them  were  legall}^  justifiable,  but 
that  others  were  not.  It  is  not  essential  to  our 
present  purpose  to  show  which  ones  were  thus 
justified  and  which  were  not:  the  fact  just  stated 
is  sufficient.  Something  more  is  needed  to  estab- 
lish the  invalidity  of  a  bond,  even  in  the  eyes  of 
the  law,  than  the  fact  that  in  its  issue  the  precise 

1  Burroughs:  "Law  of  Public  Securities,"  p.  320 s^'. 


210  REPUDIATION  OF  STATE  DEBTS 

conditions  of  the  law  authorizing  it  have  not 
been  complied  with.  The  rights  of  innocent  and 
bona  fide  bondholders  are  not  thus  summarily  to 
be  disposed  of.  It  is  necessary  for  this  purpose 
to  establish  that  the  law  authorizing  the  bonds 
was  unconstitutional,  or  that  the  alleged  irregu- 
larity in  their  issue  amounted  to  the  setting  aside 
of  the  law  entirely,  and  then  it  is  a  question  upon 
which  the  Supreme  Court  of  the  United  States 
and  our  State  courts  do  not  agree  —  whether  the 
recitals  of  the  officers  authorized  to  issue  the  bonds 
do  not  bind  the  State.  ^ 

The  question  arises  at  this  point  whether  it  is 
expedient  that  the  State  should  in  all  cases  take 
advantage  of  her  right,  and  repudiate  whenever 
such  a  proceeding  would  be  sanctioned  by  the 
courts.  The  answer  to  this  question  should  de- 
pend upon  the  gravity  of  the  case.  It  would  be 
unwise  to  lay  it  down  as  a  general  principle  that 
the  State  should  adopt  this  course  of  procedure 
or  the  opposite  in  all  cases.  It  is  necessary  to  dis- 
criminate, and  in  each  case  to  set  over  against  each 
other  the  advantages  and  disadvantages  of  repudi- 
ation. While  the  presumption  in  the  circumstances 
supposed  may  be  in  favor  of  repudiation,  it  is  easy 
to  adduce  cases  in  which  such  a  course  would 
greatly  injure  the  State,  as  well  as  do  rank  injus- 
tice to  her  creditors.  The  equities  of  the  case  and 
the  interests  of  the  State's  credit  should  have 
great  weight  in  doubtful  cases. 


THE  CAUSES   OF  REPUDIATION.  211 

In  equity  inquiry  should  always  be  made  into  the 
innocency  or  fraud  of  the  creditor.  In  many  cases 
in  this  country  men  have  secured  the  bonds  of  the 
State  through  connivance  and  fraud,  without  part- 
ing with  a  dollar  of  their  money.  Cases  of  this 
sort  should  not,  of  course,  be  treated  with  leniency, 
and  repudiation  of  the  debt  would  be  the  proper 
course,  unless  greater  injury  than  that  involved  in 
the  fraud  Avould  thereby  come  to  the  State.  On 
the  other  hand,  it  is  beneath  the  dignity  of  the 
State  and  injurious  to  public  morals  to  repudiate 
the  bonds  of  an  innocent  holder  who  has  parted 
with  his  money  in  good  faith  and  possibly  in  part 
from  patriotic  motives.  Only  when  the  higher  in- 
terests of  the  State  clearly  demand  such  a  procedure 
should  she  take  advantage  of  her  legal  rights  under 
such  circumstances. 

A  second  point  worthy  of  careful  consideration 
in  case  the  illegality  of  a  debt  has  been  established, 
pertains  to  the  question  whether  or  not  the  State 
has  enjoyed  the  benefit  of  the  borrowed  money. 
In  some  of  the  cases  referred  to  the  repudiated 
bonds  had  been  issued  in  aid  of  railroads  and  other 
public  works,  from  which  the  State  received  no 
benefit  whatever;  in  others  the  money  obtained  by 
the  loan  was  used  for  the  payment  of  the  ordinary 
and  regular  expenses  of  the  government.  The 
question  naturally  arises  whether  the  State  is  jus- 
tified in  refusing  to  pay  back  money  which,  though 
obtained  by  her  officers  without  her  consent,  was 


212  REPUDIATION   OF  STATE  DEBTS. 

nevertheless  accepted  and  used  by  her.  In  the 
case  of  an  individual  we  would  have  no  hesitation 
in  answering  this  query  in  the  negative.  The  fact 
that  the  principal  received  and  expended  the  money 
which  his  agent  borrowed  in  his  name,  even  though 
without  his  consent,  would,  in  the  judgment  of  any 
civilized  community,  make  the  debt  binding  and 
legitimate.  The  case  of  a  State  is  not  strictly 
analogous  to  this,  because  the  acceptance  and  ex- 
penditure of  the  money  directly  are  impossibili- 
ties. Agents  must  act  for  her  here  as  well  as  in 
the  matter  of  borrowing,  and  collusion  between 
these  two  sets  of  agents  is  possible,  if  there  are 
two  sets ;  and,  of  course,  if  the  same  persons  both 
borrow  and  expend  the  money,  further  investiga- 
tion would  be  needed  in  order  to  discover  the  obli- 
gation of  the  State.  The  case  of  the  State,  then, 
is  really  analagous  to  that  of  an  individual  whose 
agent  borrowed  money  without  his  consent,  and 
also  expended  it.  To  establish  the  obligation  of 
the  principal  to  pay  the  debt  under  such  circum- 
stances, it  would  be  necessary  to  establish  the  fact 
that  the  agent  acted  in  the  expenditure  with  his 
consent.  In  like  manner,  if  investigation  develops 
the  fact  that  money  illegally  borrowed  was  expended 
with  the  full  and  legally  expressed  consent  of  the 
people's  representatives,  it  is  difficult  to  escape 
the  conclusion  that  the  State  is  under  moral  obli- 
gations to  pay  the  debt. 

Aside  from  the  equity  of  the  case,  a  failure  to 


THE  CAUSES   OF  liEPUDIATION.  213 

observe  which  will  disgrace  the  State  and  inflict  a 
blow  upon  public  morality,  the  maintenance  of  the 
State's  credit  demands  that  she  shall  not  repudiate 
her  bonds  except  in  the  most  extreme  cases.  It  is 
probable  that  repudiation,  even  under  such  circum- 
stances, would  render  it  difficult  to  borrow  again. 
The  money-loaning  public  is  extremely  sensitive. 
It  does  not  easily  appreciate  nice  constitutional  and 
legal  points.  Especially  difficult  is  it  to  convince 
this  public  that  the  State  which  accepts  and  uses 
borrowed  money,  and  then  refuses  to  pay  it  back  in 
due  time,  is  not  guilty  of  robbery.  The  fact  that 
irregularities  in  the  issue  of  the  bonds  have  taken 
from  the  creditor  all  remedy  in  the  courts,  does  not 
prevent  him  from  making  the  determination  that 
he  will  not  again  risk  his  money  in  such  a  manner. 
Even  under  circumstances  the  most  favorable  to  the 
State,  repudiation  shakes  the  public  faith  in  public 
securities. 

Our  own  experience  in  this  matter  cannot  be 
conclusive  on  the  point  under  discussion,  for  most 
of  the  cases  of  repudiation  recorded  in  the  pre- 
vious chapters  cannot  be  legally  justified  ,•  but  it 
may,  nevertheless,  be  interesting  in  this  connection 
to  note  the  fluctuations  in  State  securities  during 
a  part  of  the  decade  of  repudiation.  The  follow- 
ing table  was  compiled  by  Hon.  Robert  P.  Porter, 
and  was  published  in  the  International  Review  for 
1880. 


214  REPUDIATION  OF  STATE  DEBTS. 

Fluctuations  in  State  securities  from  1872  to  1879, 
inclusive,  with  the  average  value  for  the  same 
time :  — 

Aver- 

StATES.  1872  1873  1874  1875  1876  1877  1878  1879  age. 

Maine     ...  100  100  100  100  100  100  100  100  100 

New  Hampshire,  100  100  100  100  100  100  100  100  100 

Vermont      .     .  100  100  100  100  100  100  100  100  100 

Massachusetts .  103  103  103  103  103  103  103  103  103 

Rhode  Island   .  99  99  99  102  107  110  105  110  104 

Connecticut     .  99  99  99  103  105  109  106  106  103 

New  York    .     .  104  105  106  109  110  113  115  114  110 

Pennsylvania   .  99  100  100  100  100  100  10%  100  99 

Maryland     .     .  102  102  102  102  102  102  102  102  102 

Virginia       .     .  50  42  35  35  44  39  36  36  38 

North  Carolina,  21  29  21  30  19  24  24  33  25 

South  Carolina,  34  27  15  28  31  32  31  11  26 

Georgia      .     .  73  87  68  81  98  101  104  107  90 

Alabama    .     .  90  57  25  43  26  26  29  60  45 

Louisiana  .     .  68  50  19  25  35  39  61  67  46 

Texas    ...  88  73  83  95  101  101  101  101  93 

Arkansas    .     .  50  30  19  12  15  11  8  7  19 

Tennessee .     .  65  79  69  38  44  42  35  33  53 

Kentucky  .     .  96  96  98  100  101  101  101  101  99 

Ohio      ...  100  101  100  102  107  106  104  106  103 

Indiana      .     .  100  102  100  99  100  100  100  100  100 

Illinois  ...  99  95  95  99  101  100  102  103  99 

Michigan    .    .  98  97  94  102  105  104  104  107  101 

Missouii     .     .  94  90  96  95  101  103  104  105  98 

California  .     .  110  110  110  105  105  105  105  105  107 

This  table  clearly  shows  the  deadly  influence  of 
repudiation  on  State  credit.  It  shows  also  that  in 
this  country,  at  least,  the  money-loaning  public 
does  not  distinguish  between  cases  of  justifiable 
and  unjustifiable  repudiation,  but  has  condemned 
all  indiscriminately. 

The   inquiry   upon  which   we   entered   in   this 


THE  CAUSES  OF  REPUDIATION.  215 

chapter  has  advanced  but  one  step.  The  illegal 
character  of  bonds  is  but  one  of  many  causes  of 
repudiation  in  this  country.  In  some  cases,  as  we 
have  seen,  illegality  was  simply  alleged  as  a  pretext 
to  cover  up  the  real  condition  of  affairs.  In  all 
cases  it  was  accompanied  and  re-enforced  by  other 
more  or  less  potent  causes.  In  our  further  inquiry 
we  must  go  behind  and  below  the  phenomena,  and 
look  deeper  into  the  public  mind  for  the  explanation 
which  we  seek.  Four  topics  must  be  considered  in 
this  connection :  The  heavy  pressure  of  debts  on  the 
repudiating  States  ;  the  corruption  of  State  officials ; 
the  financial  crisis  of  1837;  and  the  Civil  War. 

No  one  can  examine  the  facts  presented  in  the 
previous  chapters  without  being  impressed  with  the 
magnitude  of  the  debt  of  the  repudiating  States. 
At  about  the  time  of  the  appearance  of  the  sen- 
timent in  favor  of  repudiation  in  these  States,  the 
debts  which  were  imminent,  including  both  those 
recognized  and  unrecognized,  were  somewhat  near 
the  following  figures :  In  Arkansas,  $8,600,000,  be- 
sides about  15,000,000  of  bonds  issued  to  railroads  ; 
in  Florida,  14,850,000;  in  Georgia,  $11,135,500; 
in  Louisiana,  $22,500,000  ;  in  Mississippi,  $7,000,- 
000  ;  in  Virginia,  $45,000,000 ;  in  North  Carolina, 
$15,000,000 ;  in  South  Carolina,  $15,850,000 ;  in 
Alabama,  $11,345,000 ;  in  Tennessee,  $43,950,000. 

If  we  reckon  the  average  rate  of  interest  paid  at 
five  per  cent,  which  is  below  the  correct  figure,  the 
annual  interest  charges  represented  by  these  debts 


216  BEPUDIATION  OF  STATE  DEBTS. 

are  about  as  follows :  In  Arkansas,  1433,000,  besides 
about  1247,000  for  which  she  was  liable  in  case  the 
railroads  defaulted ;  in  Florida,  $242,000  ;  in  Geor- 
gia, $556,000 ;  in  Louisiana,  $1,121,000 ;  in  Missis- 
sippi, $350,000  ;  in  Virginia,  $2,250,000  ;  in  North 
Carolina,  $750,000  ;  in  South  Carolina,  $792,000; 
in  Alabama,  $567,000;  in  Tennessee,  $2,192,000. 

The  total  amount  raised  by  ta^^tion  in  these 
States  at  about  the  time  to  which  these  figures 
refer  indicate  that  such  interest  charges  as  these 
were  really  seriously  burdensome.  When  Florida 
was  threatened  with  an  annual  interest  charge  of 
about  $200,000,  her  total  revenue  was  less  than 
$100,000  per  annum.  The  interest  on  Virginia's 
debt  in  1870  amounted  to  about  $2,000,000,  while 
her  income  for  1869  did  not  reach  $3,000,000.  An 
interest  charge  of  $700,000  and  more  hung  over 
North  Carolina  when  her  taxes  yielded  only  a  lit- 
tle over  $500,000.  The  interest  on  Alabama's 
funded  debt  amounted  to  over  $500,000  at  a  time 
when  her  income  from  taxation  amounted  to  only 
a  little  over  $800,000. 

Such  facts  as  these  do  not  furnish  an  argument 
in  favor  of  repudiation.  The  States  could  un- 
questionably have  endured  a  much  heavier  weight 
of  taxation,  and  the  enormous  increase  in  the 
wealth  of  the  Southern  States  during  the  ■  last 
decade  shows  that  they  were  becoming  year  by 
year  better  able  to  bear  heavy  burdens  of  indebted- 
ness.    It  would  in  every  case  have  been  possible 


THE  CAUSES  OF  REPUDIATION.  217 

to  arrange  with  bondholders  for  the  payment  of 
both  principal  and  interest  at  some  future  time 
when  the  resources  of  the  State  should  be  greater. 
Any  bondholder  would  have  preferred  such  an 
arrangement  to  the  repudiation  of  his  bonds. 
Other  expedients  might  have  been  devised.  But 
while  these  facts  do  not  furnish  an  argument  in 
favor  of  repudiation,  they  certainly  help  to  explain 
the  fact.  It  is  not  surprising  that  tax-payers 
sought  ways  and  means  of  avoiding  such  burdens, 
and  that  they  grasped  at  every  straw  which  offered 
them  hope. 

It  is  still  easier  to  understand  the  sentiment  in 
favor  of  repudiation  when  we  remember  that  in 
most  cases  the  debts  which  gave  the  greatest 
weight  to  this  burden  were  rolled  upon  the  shoul- 
ders of  the  States  by  defaulting  and  bankrupt 
railroad  or  banking  corporations  whose  enterprises 
the  State  had  attempted  to  advance  by  indorsing 
their  bonds  or  by  issuing  bonds  to  them  directly. 
The  people  felt  that  these  debts  were  not  their 
own  ;  that  they  were  about  to  be  heavily  taxed  in 
order  to  foot  the  bills  of  speculators  who  had  very 
likely  emerged  from  a  cloud  of  bankruptcy  with 
well-lined  pockets.  The  matter  was  made  still 
worse  by  the  fact  that  in  most  cases  the  property 
mortgaged  to  the  State  for  security  was  of  little 
value  when  the  mortgage  was  foreclosed.  Georgia 
secured  some  railroad  property,  the  utilization  of 
which  plunged  her  still  more  deeply  into  debt. 


218  REPUDIATION  OF  STATE  DEBTS. 

Tennessee  had  the  same  experience.  In  many 
cases  the  roads  mortgaged  defaulted  before  their 
completion,  and  the  State  obtained  by  foreclosure 
only  a  few  miles  of  graded  track  which  could  be 
sold  simply  for  railroad  purposes,  and  that  at  a  great 
sacrifice,  and  which  the  State  was  in  no  condition 
to  utilize  for  herself.  When  the  enterprises  aided 
were  banks,  as  in  the  cases  of  Mis^sippi,  Florida, 
and  Tennessee  in  part,  the  matter  was  still  worse, 
for  usually  the  State  had  invested  heavily  in  bank 
stock,  which  became  worthless  when  the  banks 
failed.  It  is  exceedingly  hard  for  a  man  to  pay  a 
note  which  he  has  indorsed  for  the  accommoda- 
tion of  a  friend.  Unquestionably  many  such  debts 
would  be  repudiated  if  their  payment  could  not  be 
enforced  by  the  courts.  It  is  very  much  harder  to 
pay  heavy  taxes  on  account  of  the  failure  of  cor- 
porations in  which  one  has  no  direct  interest.  The 
former  sacrifice  is  compensated  in  part  by  the 
gratitude  of  the  friend,  and  the  hope  that  he  may 
pay  back  the  sum  in  the  future ;  but  for  the  latter 
there  is  no  compensation  of  a  positive  nature. 
Public  honor,  or  the  desire  to  save  the  State  from 
the  disgrace  of  breaking  her  plighted  faith,  are 
the  only  motives  to  the  payment  of  such  a  debt. 
.  A  second  source  from  which  we  may  draw  for  a 
partial  explanation  of  the  repudiation  sentiment 
in  some  of  our  States  is  the  belief  in  the  extrava- 
gance and  corruption  of  the  State  governments. 
That  this  belief  was  often  well  founded  is  attested 


THE  CAUSES  OF  REPUDIATION.  219 

by  an  abundance  of  facts  in  the  case  of  at  least 
two  States. 

While  the  greater  part  of  the  debt  of  South 
Carolina  was  being  contracted,  the  legislature  of 
that  State  was  in  the  hands  of  a  horde  of  ignorant 
men  who  cared  only  for  their  own  gains.  The 
report  of  the  Joint  Investigating  Committee  on 
the  public  frauds  of  South  Carolina  contains  in 
the  space  of  about  nine  hundred  pages  a  record  of 
fraud  and  extravagance  which  is  unequalled  in  the 
annals  of  this  country,  and  hardly  surpassed  in 
those  of  any  other.  Speaking  of  the  extravagance 
of  the  legislatures  of  this  period  as  compared  with 
the  economy  of  those  of  previous  periods,  a  writer 
in  the  Internatmial  Review  ^  uses  the  following 
language :  "  The  old  legislature  had  been  contented 
with  five-dollar  clocks ;  the  new  one  purchased  six- 
hundred-dollar  clocks.  Forty-cent  spittoons  gave 
way  to  eight-dollar  cuspidors ;  four-dollar  benches 
were  abolished  to  give  place  to  two-hundred-dollar 
crimson  plush  sofas.  The  legislator  who  was  con- 
tent to  serve  his  State  upon  a  dollar  chair,  in  the 
new  era  leisurely  lounged  upon  sixty-dollar  plush 
Gothic  chairs ;  eighty  dollar  library  desks  took  the 
place  of  four-dollar  pine  tables ;  and  twenty-five-cent 
hat  pegs  were  abolished  to  give  place  to  thirty- 
dollar  hat-racks ;  ten-dollar  office  desks  were  aban- 
doned, and  others  costing  one  hundred  and  seventy- 
five  dollars  substituted ;  coats  that  formerly  hung 

1  Hon.  R.  P.  Porter  in  November  number,  1880. 


220        iiEPuDtATioN  or  StATi:  l)^]^r3^. 

upon  fifty-cent  coat-hooks  were,  under  the  new 
dispensation,  carefully  put  away  in  one-hundred- 
dollar  wardrobes  ;  cheap  matting  was  taken  up  and 
body  Brussels  substituted  ;  the  finest  Havana  cigars 
took  the  place  of  clay  pipes,  champagne  of  whiske}^, 
six-hundred-dollar  mirrors  of  four-dollar  looking- 
glasses,  while  six-hundred-dollar  brocatel  curtains 
and  lambrequins  adorned  the  windows  from  which 
formerly  hung  two-dollar  curtains."  ^ 

During  this  carnival  of  extravagance  enormous 
debts  were  contracted,  the  amount  of  which  could 
not  be  accurately  estimated  on  account  of  the  con- 
fusion of  the  public  records.  Legislative  committees 
unearthed  the  most  gigantic  frauds,  and  completely 
destroyed  the  confidence  of  the  people  in  the 
validity  of  the  greater  part  of  the  State  debt. 

The  investigations  made  by  legislative  commit- 
tees of  the  State  of  Georgia  revealed  a  most  sus- 
picious mass  of  facts  concerning  the  official  acts  of 
those  concerned  in  the  negotiation  of  many  of  her 
bonds.  One  of  her  governors  practically  confessed 
his  complicity  in  bond  swindling  schemes  by  re- 
signing his  office  and  fleeing  the  country.  Other 
officials  were  suspected  of  the  same  crime,  though 
direct  and  absolute  proof  was  not  obtained.  What- 
ever the  facts  may  have  been,  it  is  unquestioned 
that  the  impression  went  forth  among  the  people 
of  the  State  that  they  had  been  fearfully  swindled 
by  those  to  whom  they  had  intrusted  the  reins  of 

1  For  further  facts,  see  Appendix  VI. 


THE  CAUSES  OF  REPUDIATION.  221 

government.  Fraud  was  also  charged  against  the 
State  governments  of  Alabama,  Tennessee,  and 
Louisiana. 

It  is  not  necessary  for  our  purpose  to  show  that 
these  charges  were  true.  It  is  sufficient  to  indi- 
cate the  fact  that  the  impression  that  tliey  were 
true,  or  the  fear  that  they  might  be  true,  was 
prevalent  among  the  people,  and  was  intensified 
in  their  representatives.  That  such  an  impression 
tended  to  create  a  sentiment  in  favor  of  repudia- 
tion, there  can  be  little  doubt.  Overburdened 
tax-payers,  even  though  their  respect  for  public 
morality  may  be  very  high,  will  not  fail  to  give 
themselves  the  benefit  of  any  doubts  concerning 
the  justice  of  the  burdens  they  are  called  upon  to 
bear. 

No  analysis  of  the  causes  of  repudiation  in  this 
country  can  approximate  completeness  which  does 
not  include  the  characteristics  of  the  two  periods 
of  our  history  in  which  these  events  occurred.  A 
reference  to  the  dates  of  the  passage  of  the  repu- 
diation acts  which  have  been  described,  will  show 
the  limits  of  these  periods.  To  the  first  belong 
Florida  and  Mississippi.  The  former  State  adopted 
the  constitution  which  committed  her  to  repudia- 
tion in  1845,  and  the  message  of  the  Governor  of 
the  latter  State,  in  which  repudiation  was  first  sug- 
gested, was  given  to  the  public  in  January,  1841. 
Most  of  the  other  States  passed  their  repudiation 
acts  in  the  decade  between  1870  and  1880. 


222  REPUDIATION  OF  STATE  DEBTS. 

In  the  early  forties^  the  first  period  to  be  con- 
sidered, the  people  of  our  country  were  in  the, 
midst  of  the  gloom  and  despair  which  succeeded 
the  terrible  financial  crisis  of  1837  and  1838,  and 
which  brought  financial  ruin  to  thousands.  To 
appreciate  the  state  of  the  public  mind  at  this 
time,  it  is  necessary  to  recall  the  circumstances 
which  led  to  that  crisis. 

The  seven  years  preceding  were  declared  by  a 
prominent  judge  of  that  period,^  to  be  "one  of 
the  most  extraordinary  financial  periods  —  perhaps 
the  most  extraordinary  one  —  which  the  world  has 
ever  seen."  Ever  since  the  close  of  the  War  of 
1812,  and  the  Napoleonic  wars  in  Europe,  our 
country  had  experienced  unparalleled  prosperity. 
Our  population  had  increased  from  seven  to  seven- 
teen millions.  Manufactures  had  been  success- 
fully started,  and  were  producing  a  quantity  of 
some  commodities  sufficient  not  only  to  supply 
our  own  wants,  but  also  to  supply  the  material  for 
a  respectable  export  trade.  Our  commerce  had 
been  enormously  increased  as  a  result  of  this  and 
such  other  causes  as  a  vast  increase  in  the  per 
capita  production  of  agricultural  products,  the 
opening  up  of  our  mineral  resources,  the  establish- 
ment of  peaceful  relations  with  England  and 
France,  and  the  natural  development  of  American 
enterprise.  New  territories  of  vast  extent  had 
been  opened  to  enterprise  and  speculation  by  an 

1  Judge  Curtis  in  North  American  Review  for  January,  1844. 


THE  CAUSES  OF  REPUDIATION.  223 

enormous  extension  and  improvement  of  the  means 
of  communication,  notably  by  the  building  of  canals 
and  railroads.  Cities  had  grown  up  in  an  incredi- 
bly short  time,  in  the  midst  of  wildernesses.  In 
fact,  everything  in  the  line  of  material  prosperity 
seemed  to  be  within  our  grasp,  and  we  became  a 
wonder  to  ourselves  and  to  the  rest  of  the  world. 

The  writer  just  referred  to  eloquently  described 
our  attainments  duiing  this  period  in  the  follow- 
ing words  :  "  The  stories  of  the  old  poets  concern- 
ing heroes  who  built  cities  by  the  shore  of  the  sea, 
and,  by  their  mighty  energies  and  the  direct  assist- 
ance of  the  divine  power,  created  states  that  were 
secured  by  laws,  supplied  by  industry,  and  adorned 
with  the  arts  of  life,  do  not  sound  incredible  or 
strange  in-  our  ears.  In  the  lifetime  of  one  gene- 
ration we  have  seen  an  extent  of  wilderness  that 
seemed  illimitable  divided  into  cultivated  farms ; 
solitary  inland  seas  made  glad  wdth  the  presence 
of  an  active  and  prosperous  commerce ;  great 
rivers,  whose  waters  formerly  reflected  only  the 
shadows  of  the  forest,  running  by  the  luxurious 
abodes  of  civilized  men,  and  bearing  the  varied 
products  of  labor ;  cities  which  are  already  worthy 
of  the  name,  filled  with  an  industrious  and  intelli- 
gent population,  springing  up  in  the  solitary  places  ; 
nay,  great  States,  whose  people  are  reckoned  by 
millions,  brought  into  existence  and  established 
during  this  short  period." 

The   remarkable  financial  era  of   which  Judge 


224       hepudiation  of  state  debts. 

Curtis  spoke  was  produced  in  part  by  this  great 
material  progress,  and  in  part  by  a  combination  of 
circumstances  which,  if  not  entirely  fortuitous,  was 
at  least  very  unusual.  The  use  of  bills  of  exchange 
became  general  during  this  period,  which  vastly 
increased  our  facilities  for  foreign  commerce,  and 
was  equivalent  to  a  large  addition  to  our  com- 
mercial capital.  While  this  change  in  the  methods 
of  exchange  was  in  progress,  the  war  against  the 
United  States  Bank  was  being  carried  on.  As  a 
result  of  this,  deposits  were  transferred  to  State 
banks,  and  local  banks  were  multiplied  all  over 
the  Union.  The  nominal  capital  of  banks  of  this 
class  was  increased  from  one  hundred  and  ten  to 
two  hundred  and  twenty  millions  between  the 
years  1830  and  1837.  The  country  was  flooded 
with  the  notes  of  these  banks,  which,  together 
with  the  practical  increase  in  our  circulating 
medium,  caused  by  the  rapid  development  of  the 
credit  system,  produced  inflation  and  an  unnatural 
rise  of  prices  which  exaggerated  the  substantial 
progress  which  the  country  was  experiencing.  In 
addition  to  all  this  the  States,  in  1836,  received 
subsidies  from  the  treasury  of  the  United  States, 
in  the  form  of  shares  of  the  surplus  revenue, 
which  was  then  being  distributed. 

Under  the  influence  of  all  this  stimulus  both 
States  and  individuals  became  intoxicated,  and 
contracted  obligations  in  the  most  reckless  fashion. 
The   former  embarked  in  gigantic  enterprises  in 


TSi:  CAUSES  OF  REPUDIATION.  225 

the  form  of  public  works,  to  pay  for  Avhich  millions 
of  dollars  of  bonds  were  issued.  These  sold  readily 
at  good  prices  in  the  markets  of  Europe.  Finan- 
ciers the  world  over  had  unbounded  confidence  in 
our  good  faith,  for  we  had  just  (in  1836)  per- 
formed the  unusyial  feat  of  paying  off  a  national 
debt ;  and  the  same  circumstances  which  gave  us 
confidence  in  ourselves  dispelled  any  doubts  which 
might  at  one  time  have  entered  their  minds  con- 
cerning our  ability  to  pay  almost  any  amount  of 
debts. 

The  influx  of  the  millions  of  foreign  capital 
which  represented  the  proceeds  of  these  bonds, 
added  to  the  stimulus  produced  by  the  inflated 
bank  issues,  the  government  subsidies,  and  the 
real  industrial  progress  of  the  nation,  and  the 
result  was  an  epidemic  of  reckless  speculation 
which  spread  throughout  tlie  business  world,  and 
did  not  exempt  from  its  influence  the  humblest 
classes.  In  the  words  again  of  Judge  Curtis, 
"  Some  who,  in  former  times,  would  have  found 
occupation  suited  to  their  daring  tempers  in  the 
field,  embarked  their  recklessness  in  commerce  ; 
others,  whose  rashness  under  ordinary  circum- 
stances would  have  been  soon  checked  by  disaster, 
or  prevented  from  showing  itself  by  want  of  means, 
found  that  their  energy  and  love  of  adventure  had 
made  them  leaders ;  and  others  still,  whose  fears 
would  have  been  roused  by  danger,  lost  all  hesita- 
tion in  the  general  confidence.     Men  acted  as  if  a 


226  REPUDIATION  OF  STATE  DEBTS. 

short  .and  secure  road  to  wealth  had  been  dis- 
covered on  which  all  might  travel,  and  he  who 
went  fastest  would  be  the  first  to  reach  the  desired 
end.  The  result  was  such  {#  morbid  tendency  to 
excess  in  all  financial  affairs  as  had  never  before 
been  witnessed.  .  .  .  All  uses  of  capital  seemed 
to  be  followed  by  certain  and  large  returns,  and 
men  were,  therefore,  eager  to  borrow.  All  pur- 
suits appeared  to  be  safe  and  prosperous,  and, 
therefore,  those  who  had  money  were  desirous  to 
lend  it.  So  much  security  was  felt  that  little  was 
asked ;  and  to  obtain  money  nothing  more  was 
necessary  than  to  show  the  lender  that  it  was  to 
be  employed  in  some  magnificent  scheme  which 
stood  well  with  the  large  expectations  of  the  time, 
and  was  in  season  with  the  glorious  summer  of 
men's  hopes." 

Such  was  the  state  of  the  public  mind  on  the 
eve  of  the  great  financial  crisis  of  1837.  Only 
a  few  of  the  most  conservative  and  far-sighted 
saw  that  these  great  hopes  and  expectations  and 
this  unparalleled  prosperity  were  based  upon  a 
greatly  inflated  currency  and  a  superstructure  of 
credit  which  could  not  long  sustain  the  weight 
which  was  resting  upon  it.  The  first  intimation 
of  the  true  state  of  affairs  came  from  London, 
when  the  Bank  of  England  stopped  the  credit 
of  several  American  banking  houses.  This  act 
was  rendered  necessary  by  the  flow  of  specie 
which  endanorered  the  bank  itself. 

o 


THE  CAUSES  OF  REPUDIATION.  227 

At  this  very  time,  notwithstanding  the  inflation 
of  our  currency  and  the  constant  influx  of  foreign 
capital,  the  demand  for  money  in  this  country  ex- 
ceeded the  supply,  and  this  cutting  off  of  the  means 
of  foreign  exchange  through  instruments  of  credit, 
together  with  Jackson's  specie  circular,  made  a 
demand  for  specie  Avhich  could  not  possibly  be 
supplied.  At  once  there  was  a  general  call  for 
the  payment  of  obligations,  and  the  banks  were 
besieged  for  the  coin  which  they  did  not  possess 
and  could  not  obtain.  Temporary  expedients, 
such  as  the  issue  of  something  over  a  million  ster- 
ling bonds  by  the  Bank  of  the  United  States  of 
Pennsylvania,  were  of  little  avail,  and  the  inevi- 
table suspension  of  specie  payments  came.  With 
it  came  a  general  suspension  of  business. 

For  several  months  the  people  devoted  them- 
selves to  the  payment  of  their  debts  whenever  this 
was  possible,  and  to  the  settlement  of  their  affairs 
according  to  the  laws  of  bankruptcy  whenever  this 
was  not  possible.  There  was  a  general  redistri- 
bution of  the  wealth  of  the  country.  Thousands 
of  persons  lost  the  whole  or  a  large  part  of  their 
property,  and,  what  was  equally  as  bad,  no  money 
could  be  gotten  at  any  price  in  order  to  make  a 
fresh  start.  Even  wealthy  persons  found  it  diffi- 
cult to  get  the  money  needed  for  ordinary  ex- 
penses, and  in  many  States  the  average  farmer 
and  laborer  could  get  no  currency  at  all.  "  Fail- 
ures were  almost  innumerable.     Trade  had  fallen 


228  JREPUDIATION  OF  STATE  DEBTS. 

off,  and  when  prosecuted  was  hazardous.  A  deep 
gloom  settled  upon  men's  minds.  .  .  .  The 
people  were  amazed  at  thi^ir  own  disasters,  and 
afraid  to  act  in  any  way  lest  they  should  run  into 
new  mistakes."  The  bubble  of  prosperity  had 
burst,  and  men's  eyes  were  at  last  opened  to  the 
true  state  of  affairs. 

Many  of  the  States  were  no  better  off  than  in- 
dividuals. Pennsylvania,  Maryland,  Michigan, 
Mississippi,  Illinois,  and  Indiana  defaulted  in 
their  interest  payments.  The  period  of  debt 
contracting  had  suddenly  come  to  an  end.  No 
more  money  could  be  borrowed,  even  to  meet  the 
comparatively  small  amount  required  for  these  in- 
terest payments.  The  only  resort  was  to  increased 
taxation,  and  that  on  a  much  diminished  taxable 
basis.  The  feelings  of  tax-payers  may  be  ima- 
gined. These  debts  had  been  contracted  for  public 
works  which  the  people  had  expected  to  be  pro- 
ductive of  great  wealth.  It  had  not  for  a  moment 
been  imagined  that  they  could  be  the  occasion  of 
an  increase  in  the  tax  levj^ ;  "  and  when,  the  means 
of  the  State  exhausted,  it  was  discovered  that  the 
moneys  borrowed  must  be  paid  out  of  ordinary 
revenue,  the  public  was  filled  with  consternation." 
It  is  scarcely  surprising  that  at  such  a  time  creditor 
should  have  been  synonomous  with  enemy,  and 
that  a  public  creditor,  —  especially  when  the  claim 
which  he  held  was  believed  to  be  tainted  witli 
fraud,  as  in  the  case  of  the  bonds  which  had  been 


THE  CAUSES   OF  REPUDIATION.  229 

issued  to  the  banks,  and  were  a  partial  cause  of 
their  disasters, — should  not  have  been  given  a 
fair  hearing.  Sound  reasoning  and  the  triumph 
of  the  highest  moral  principles  will  be  sought  in 
vain  in  the  average  man  under  such  circumstances. 
It  is,  of  course,  greatly  to  be  regretted  that 
Mississippi  and  Florida  did  not  follow  the  good 
example  set  them  by  the  other  States  w^hich  were 
suffering  from  the  same  malady.  They  issued 
due  bills  or  interest  certificates  for  the  sum  which 
they  found  themselves  unable  to  pay,  and  in  one 
way  and  another  passed  through  the  ordeal  with 
honor  and  credit  intact.  The  renewed  prosper- 
ity of  succeeding  years  enabled  them  to  repair 
the  damages  of  this  period,  and  to  meet  Avith  ease 
all  their  obligations.  Mississippi  and  Florida 
might  have  done  likewise  had  not  the  cry  of  il- 
legality been  raised  against  their  bonds.  The 
people  of  these  States  were  unable,  under  the  cir- 
cumstances, to  resist  the  temptation  to  repudiation 
which  this  pretext  furnished  them,  especially  after 
the  question  had  gotten  into  politics  and  the  fate 
of  party  measures  had  been  staked  upon  it.  What 
Mississippi  might  have  done  under  other  circum- 
stances it  is  useless  to  inquire ,  but  that  the  state 
of  mind  of  her  citizens  induced  by  their  disasters 
was  a  more  potent  cause  of  repudiation  than  the 
alleged  illegality  of  her  bonds,  no  one  who  studies 
the  subject  at  this  distance  of  time  and  in  the 
light  of  historical  facts  can  doubt. 


230  BEPUDIATION  OF  STATE  DEBTS. 

Turning  now  to  the  second  group  of  States, 
whose  acts  of  repudiation,  as  we  have  seen,  were 
passed  for  the  most  part  in  the  decade  between 
1870  and  1880,  we  note  that  all,  with  the  single 
exception  of  Minnesota,  were  seceders  from  the 
Union  in  1861.  This  fact  at  once  suggests  the 
question  whether  there  is  not  a  relation  of  cause 
and  effect  between  the  disasters  which  these 
States  suffered  during  the  Civil  War  and  the  period 
of  reconstruction  and  their  acts  of  repudiation. 
The  answer  to  this  question  will  appear  in  a 
consideration  of  the  effect  upon  these  States 
which  may  be  fairly  attributed  to  the  events  of 
this  unfortunate  period  in  our  history. 

1.  First  of  all  we  note  that  the  civil  war  greatly 
reduced  the  taxable  basis  of  these  States.  This  is 
made  evident  by  the  following  table,  which  shows 
the  total  assessed  valuation  of  property  for  tax- 
ation purposes  in  the  States  enumerated  for  the 
years  1860  and  1870.1 


1  These  figures  include  tlie  assessments  both  of  real  estate  and 
personal  property,  and  so  the  difference  between  the  figures  for 
1800  and  1870  may  be  partially  explained  by  the  emancipation  of 
the  slaves,  who  in  1870  no  longer  appeared  in  the  item  of  personal 
property,  but  who,  nevertheless,  should  not  bo  left  out  of  any  esti- 
mate of  the  tax-paying  power  of  the  Southern  States.  The  infla- 
tion of  the  currency  in  1870  offsets  this  error  partially.  The 
assessment  of  real  estate  —  which  was  not  affected  by  the  disap- 
pearance of  slaves  from  the  category  of  property  —  shows  a  de- 
crease, not  so  great  as  that  indicated  in  the  table,  but  one  which 
was,  nevertheless,  enormous, 


THE  CAUSES  OF  REPUDIATION. 


231 


Per  cent  of 

1860. 

1870. 

decrease. 

Virginia     .     .     . 

$657,021,336 

$505,978,190 

23 

North  Carolina  . 

292,297,602 

130,378,190 

55.4 

South  Carolina  . 

489,319,128 

183,913,327 

62.4 

Georgia      .     .     . 

618,232,387 

227,219,519 

63.2 

Florida.     .     .     . 

68,929,685 

32,480,843 

52.9 

Alabama    .     .     . 

432,198,762 

155,582,595 

64 

Mississippi     .     . 

509,472,912 

177,278,890 

65.5 

Louisiana  .     .     .     . 

435,787,265 

253,371,890 

41.9 

Arkansas  .     .     . 

180,211,330 

94,528,843 

47.5 

Tennessee .    .     . 

382,495,200 

253,782,161 

33.7 

2.  The  debts  of  these  States  were  increased 
enormously  during  this  period,  as  is  evident  from 
the  following  table :  ^  — ■ 


Virginia  .     . 
North  Carolina 
Soutli  Carolina 
Georgia    .     . 
Florida     .     . 
Alabama  .     . 
Mississippi    .     , 
Louisiana     . 
Arkansas .     . 
Tennessee    . 


1860. 

$31,779,062 
9,699,000 
4,046,540 
2,670,750 
4,120,000 
6,700,000 
None 
4,. 56 1,109 
3,092,623 
20,898,606 


1870. 

$47,390,839 

29,900,045 

7,665,909 

6,544,500 

1,288,697 

8,478,018 

1,796,230 

25,021,743 

3,459,557 

38,539,802 


Highest 

point 

reached  by 

the  debt. 

$47,390,839 
29,900,045 
24,782,906 
20,197,500 
5,512,268 
31,952,000 
3,226,847 
40,416,734 
18,287,273 
41,863,406 


These  increased  debts  are  not  all,  of  course,  to 
be  attributed  either  directly  or  indirectly  to  the 
Civil  War,  but  a  very  large  proportion  of  the  in- 
crease is  thus  attributable.  A  considerable  portion 
of  it  represents  interest  which  accrued  during  the 
years  of  the  war,  the  States  being  utterly  unable 
to  pay  during  that  period.     This  item  of  increase 

1  Taken  from  R.  P.  Porter's  article  in  International  Review  for 
November,  1880. 


232  REPUDIATION  OF   STATE  DEBTS. 

was  very  great  in  States  like  Virginia  and  Ten- 
nessee, whose  ante-war  debt  was  large.  Another 
large  item  of  increase  is  attributable  to  the  period 
of  reconstruction  and  of  carpet-bag  rule.  A  part 
of  this  represents  expenditures  which  were  neces- 
sary in  order  to  put  the  wheels  of  State  govern- 
ments again  into  operation,  but  another  and  a 
larger  part  represents  the  extravagance  of  the 
carpet-bag  rSgime.  Both  of  these  items  are  refer- 
able directly  or  indirectly  to  the  Civil  War.  Other 
debts  were  contracted  during  this  period  in  aid 
of  genuine  public  works,  and,  having  no  connec- 
tion with  that  struggle,  should  not  be  consid- 
ered here. 

3.  The  Civil  War  destroyed  the  idea  of  State 
sovereignty,  \N^hich  the  South  had  (;Jierished  in 
ante-war  times,  and,  as  a  natural  and  logical 
result  of  this,  weakened  the  feeling  of  State 
responsibility.  Especially  did  the  States  believe 
themselves  devoid  of  responsibility  for  the  in- 
crease of  debts  due  to  the  interest  which  accumu- 
lated during  the  war  and  to  the  extravagance  of  the 
carpet-bag  rSgime,  Virginia's  debt  controversy 
concerned  this  very  point.  The  Riddleberger 
bill,  which  for  a  long  time  constituted  the  ulti- 
matum of  a  large  party  in  that  State,  was  based 
upon  a  calculation  of  the  indebtedness  of  the 
State  which  left  out  of  account  the  interest  which 
accumulated  during  the  war  and  the  interest  on 
that  sum  since  the  war  days.     Repeatedly  have 


THE  CAUSES  OF  REPUDIATION.  283 

the  Southern  States  disclaimed  responsibility  for 
certain  of  the  debts  contracted  during  the  period 
of  reconstruction.  The  military  governments, 
and  many  of  those  elected  during  the  carpet-bag 
regime,  were  quite  generally  regarded  as  usurpa- 
tions maintained  by  the  force  of  the  federal  gov- 
ernment, and  for  whose  acts  the  true  body  politic 
of  the  State  itself  was  not  responsible. 

4.  The  fourteenth  amendment  to  the  constitu- 
tion forced  these  States  to  repudiate  the  debts 
which  had  been  contracted  in  the  interests  of 
the  rebellion.  Viewed  from  the  standpoint  of  the 
States'  honor,  it  was  not  easy  for  loyal  Southern- 
ers to  distinguish  between  these  and  their  other 
public  debts.  It  was,  on  the  whole,  easier  for 
them  to  repudiate  the  latter  than  the  former,  since 
some  of  them  were  owed  to  Northern  capitalists, 
and  the  desire  to  avenge  themselves  upon  the 
North  for  the  disasters  they  had  suffered  was 
strong. 

When  all  these  circumstances  are  considered  in 
connection  with  the  fact  that  the  war  of  secession 
was  regarded  in  the  South  as  a  righteous  struggle, 
brought  on  that  section  through  no  fault  of  its 
own,  it  is  not  surprising  that  we  find  the  Southern 
people  in  a  state  of  mind  easily  susceptible  to 
arguments  favoring  repudiation. 

In  this  review  of  the  causes  of  repudiation  no 
account  has  been  taken  of  fundamental  differences 
of  character  between  the  Northern  and  Southern 


234  REPUDIATION  OF  STATE  DEBTS. 

people.  It  has  been  alleged  in  the  course  of  these 
debt  controversies  that  the  Southern  character  was 
unreliable  in  the  matter  of  debt  payment.  The 
fact  that  only  Southern  States  repudiated  during 
that  period  of  financial  embarrassment  which  suc- 
ceeded the  crisis  of  1837. might  be  regarded  as  proof 
of  this  unreliability.  Pennsylvania,  Indiana,  and 
Illinois  were  in  as  great  financial  straits  as  Missis- 
sippi, but  they  paid  their  debts  in  full,  while 
Mississippi  repudiated  a  portion  of  hers.  In 
Maryland,  on  the  border  line  between  the  North 
and  South,  a  party  arose  which  favored  repudia- 
tion, but  it  was  unable  to  carry  a  majority  of  the 
people  or  of  the  legislature  with  it.  In  speaking 
of  Mississippi,  Judge  Curtis  in  the  article  already 
several  times  referred  to  said  : 

"An  intelligent  foreigner,  who  feels  a  just 
indignation  when  he  hears  of  repudiation,  prob- 
ably knows  the  difference  between  a  Highland 
chieftain  and  a  London  merchant,  but  is  profoundly 
ignorant  that  differences  quite  as  great  exist 
between  the  people  of  Mississippi  and  the  people 
of  Massachusetts.  Probably  there  are  few  points 
in  which  these  differences  would  be  so  likely  to 
be  exhibited  as  upon  the  matter  of  paying  debts. 
To  pay  debts  punctually  is  the  point  of  honor 
among  all  commercial  peoples.  But  the  planters 
of  Mississippi  do  not  so  esteem  it.  They  do  nc^ 
feel  the  importance  of  an  exact  conformity  to 
contracts.     It  has  not  been  their  habit  to  meet 


THE   CAUSES   OF  REPUDIATION.  235 

their  engagements  on  the  very  day  if  not  quite 
convenient.  Certainly  they  attach  no  idea  of  dis- 
honesty to  such  a  course  of  dealing.  They  mean 
to  pay,  but  they  did  not  expect  when  they  con- 
tracted the  debt  to  distress  themselves  about  the 
payment.  If  a  friend  wants  a  thousand  dollars 
for  a  loan  or  a  gift,  he  can  have  it,  though  perhaps 
a  creditor  wants  it  also.  We  do  not  mean  to  in- 
timate that  there  are  no  high  qualities  in  such  a 
character,  but  they  are  different  from  those  which 
make  good  bankers  and  merchants ;  and,  therefore, 
bankers  and  merchants  ought  not  to  expect  such 
men  to  look  at  a  debt  just  as  they  do." 

This  statement  was  written  in  1844,  and  prob- 
ably expresses  what  was  true  at  that  time.  Very 
likely  the  Southern  method  of  looking  at  debts 
and  the  obligation  to  pay  them  was  different  from 
the  Northern,  owing  to  the  differences  between  the 
industrial  characteristics  of  the  two  sections.  This 
fact  should  be  tiiken  into  consideration  in  account- 
ing for  the  repudiation  acts  belonging  to  the  first 
period  described  above.  It  should  not  be  given 
equal  weight,  however,  in  the  period  after  the 
war.  That  the  industrial  character  of  the  South 
had  then  changed  to  a  considerable  extent  is 
evinced  by  the  character  of  the  public  works  to 
the  construction  of  which  the  States  lent  their 
financial  aid.  The  desire  to  build  railroads  and 
canals  on  a  large  scale  indicates  the  presence  of 
the  commercial  spirit  which,  according  to  Judge 


236  BEPUBIATION  OF  STATE  DEBTS. 

Curtis,  characterized  the  North  in  1844.  Ever 
since  the  close  of  the  great  civil  struggle  the 
North  and  South  have  been  growing  alike  in  oc- 
cupations, spirit,  and  character;  and  though  the 
new  South  was  only  in  its  early  infancy  in  the 
seventies,  the  commercial  spirit  which  character- 
izes it  had  begun  to  exert  its  influence.  What- 
ever effect  it  may  have  had,  however,  was  more 
than  neutralized  by  the  influences  which  have 
been  described  as  growing  out  of  the  Civil 
War.  Up  at  least  to  the  close  of  the  period  of 
reconstruction,  these  were  all  powerful  in  shap- 
ing the  thoughts  and  motives  of  the  Southern 
people. 

The  various  forces  which  have  been  reviewed, 
and  which  all  must  admit  have  been  potent  causes 
of  repudiation,  should  not  be  overlooked  in  any 
historical  estimate  of  the  moral  character  of  the 
actions  of  the  repudiating  States,  or  of  the  honesty 
and  integrity  of  the  people  who  compose  them. 
Many  of  them  were  certainly  temporary  and  ad- 
ventitious. It  is  highly  probable  that  the  com- 
binations of  circumstances  which  have  been 
described  as  characteristic  of  the  forties  and  the 
seventies  will  not  occur  again  in  our  history.  We 
should,  therefore,  be  slow  to  conclude  from  past 
experience  that  our  Southern  States  are  not  to  be 
relied  upon  for  the  payment  of  their  debts,  nor 
should  we  go  to  the  other  extreme  and,  placing 
implicit  confidence  in  our  people's  integrity,  con- 


THE  CAUSES  OF  REPUDIATION.  237 

elude  that  no  safeguards  against  repudiation  are 
needed.  It  is  the  purpose  of  our  concluding 
chapter  to  show  that  such  safeguards  are  desirable, 
and  to  suggest  those  which  seem  best  adapted  to 
our  conditions. 


VIII. 

REMEDIES   FOR   REPUDIATION. 


CHAPTER  VIII. 

EEMEDIES   FOR   REPUDIATION. 

In  view  of  what  has  been  said  in  the  pages 
immediately  preceding,  this  chapter  may  be  thought 
unnecessary.  It  was  there  shown  that  the  failure 
of  our  Southern  States  to  pay  their  debts  was  to  be 
explained,  in  part  at  least,  by  the  unusual  state  of 
the  public  mind,  induced  in  the  forties  by  the  con- 
sequences of  the  crisis  of  1837,  and  in  the  seventies 
by  the  Civil  War  and  the  events  which  followed  it. 
Surely  these  were  unusual  events,  and  their  like 
may  never  occur  again  ;  indeed,  is  not  likely  to 
occur  again.  As  causes  of  repudiation,  they  are 
certainly  no  longer  operative,  and  no  legislation  to 
counteract  them  is  necessary. 

This  view  is  also  supported  by  the  fact  that  the 
power  of  our  States  to  contract  debts  has  been  so 
much  restricted  in  recent  years  that  the  accumula- 
tion of  a  heavy  load  of  indebtedness  is  an  impossi- 
bility. New  Hampshire,  Vermont,  Massachusetts, 
Connecticut,  and  Delaware  alone  give  their  legisla- 
tures freedom  to  contract  any  debts  they  may  see 
fit.  Many  of  the  other  States  limit  the  amount  of 
241 


242         REPUDIATION  OF  STATE  DEBTS. 

debt  that  may  be  contracted  to  a  very  small  sum  ; 
for  example,  Maryland,  Michigan,  and  Oregon,  to 
$50,000 ;  Alabama,  Wisconsin,  and  Nebraska,  to 
1100,000  ;  others,  to  $200,000,  1250,000,  $300,000 
1500,000,  $750,000,  and  the  most  liberal.  New 
York,  Pennsylvania,  and  Kansas,  to  $1,000,000. 

Other  States  limit  the  amount  of  indebtedness 
possible  by  prescribing  that  it  shall  not  exceed  a 
certain  percentage  of  the  taxa'ble  valuation.  Colo- 
rado, for  example,  does  not  permit  her  total  indebt- 
edness to  exceed  three-fourths  of  a  mill  of  the 
taxable  valuation.  Indiana,  Virginia,  and  West 
Virginia  now  limit  the  power  of  borrowing  money 
to  "  casual  deficits."  The  majority  of  our  State 
constitutions  forbid  the  lending  of  the  State's  credit 
to  corporations,  and  forbid  the  purchase  by  the 
State  of  the  stock  of  corporations.  Other  States 
—  Wisconsin,  Michigan,  Minnesota,  and  Kansas  — 
are  prohibited  from  contracting  any  debt  for  inter- 
nal improvements. 

It  is  evident  that  so  long  as  these  restrictions 
remain  we  need  not  expect  to  see  our  States  con- 
tracting debts  worth  mentioning,  and  of  course  no 
remedy  for  repudiation  could  be  quite  so  effective 
as  that  which  practically  prohibits  State  debts.  It 
must  be  admitted,  therefore,  that  the  present 
policy  of  restricting  the  power  of  legislatures  to 
borrow  money,  practised  in  nearly  all  our  States, 
renders  the  adoption  of  any  remedy  for  repudia- 
tion unnecessary. 


REMEDIES  FOR  REPUDIATION.  243 

But  is  this  policy  to  be  commended  ?  Is  it 
desirable  that  our  States  should  voluntarily  relin- 
quish their  power  to  borrow  money?  The  answer 
to  this  question  must  be  sought  in  their  prospective 
need  for  more  funds  than  can  be  raised  by  taxa- 
tion in  the  course  of  a  few  years.  What  are  the 
prospects  along  this  line  ?  Are  there  any  good 
reasons  for  believing  that  our  States  will  find  it 
desirable  to  make  extensive  use  of  their  credit  in 
the  future  ?  There  are  not  wanting  signs  of  the 
times  which  render  such  a  desire  highly  probable. 
Among  these  may  be  noted  the  following :  — 

1.  The  need  for  the  cultivation  of  extensive 
tracts  of  forests  in  this  country  is  acknowledged  by 
all  who  have  any  familiarity  with  the  subject.  It 
is  also  a  well-known  fact  that  this  need  can  only  be 
met  by  the  extensive  application  of  scientific  for- 
estry through  the  agency  of  government.  It  has 
been  repeatedly  demonstrated  that  private  individ- 
uals do  not  find  it  profitable  to  engage  in  this  in- 
dustry, but  that  for  the  public  it  is  not  only  profit- 
able in  a  pecuniary  sense,  but  demanded  by  public 
interests  which  cannot  be  neglected  without  seri- 
ous injury  to  the  public  welfare.  To  inaugurate  a 
system  of  scientific  forestry  on  the  scale  demanded 
by  the  needs  of  the  time  would  entail  large  expen- 
ditures which  could  only  be  met  by  the  use  of  the 
public  credit.  The  question  remains  whether  the 
States  or  the  United  States  should  undertake  this 
work.     Unquestionably   both   of    them,    but   the 


244  REPUDIATION  OF  STATE  DEBTS. 

States  should  do  the  greater  part  of  it.  Most  of 
the  territory  which  should  be  covered  with  forests 
lies  within  the  borders  of  States,  and  the  federal 
government  could  hardly  be  expected  to  plant 
trees  upon  lands  which  it  does  not  own.  Moie- 
over,  the  States  are  better  fitted  for  this  work  than 
the  federal  government,  owing  to  the  fact  that  the}^ 
are  closer  to  the  people  and  to  the  fact  that,  on 
account  of  the  limited  extent  of  their  territory, 
they  Avould  be  able  to  devote  study  to  a  single  set 
of  conditions,  and  thus  be  more  liable  to  secure  the 
form  of  forest  culture  best  suited  to  their  interests. 
2.  The  need  of  irrigation  is  most  pressing  in 
some  of  our  Western  States.  In  the  Dakotas  and 
in  Kansas  it  may  be  said  without  exaggeration  that 
the  industry  of  agriculture,  which  supports  the 
very  life  of  the  State,  is  doomed  to  less  than  medi- 
ocre success,  perhaps  to  utter  failure,  unless  exten- 
sive systems  of  irrigation  are  made  to  supply  the 
moisture  which  nature  denies  them.  Before  the 
people  of  these  and  other  Western  States  «three 
alternatives  are  open.  They  must  either  submit 
to  crop  failures  four  years  out  of  five,  or  grant  the 
privilege  of  supplying  them  with  water  to  corpora- 
tions which  would  thus  acquire  over  them  the 
powder  almost  of  life  and  death ;  or  they  must  un- 
undertake  the  work  of  irrigating  their  farms 
through  the  agency  of  their  State  governments. 
There  can  be  no  doubt  concerning  the  best  course 
for  them  to  pursue.     A  matter  which  so  vitally 


REMEDIES  FOR  REPUDIATION.  245 

concerns  them  could,  with  safety,  be  intrusted 
to  a  State  legislature,  for  fraud  and  misgovernuient 
cannot  permanently  conceal  themselves  when  they 
directly  affect  the  pockets  of  the  people.  The 
construction  of  irrigation  works  would  occasion  in 
the  beginning  a  large  outlay,  which  might  in  time 
be  repaid  with  interest  from  the  profits  of  the  works, 
but  w^hich  could  be  supplied  when  wanted  only  by 
borrowing  on  the  credit  of  the  States. 

3.  State  ownership  of  natural  monopolies  is  ad- 
vocated by  an  increasing  number  of  persons  each 
year,  and  it  is  certainly  not  unreasonable  to  expect 
that  States  will  desire  to  control  at  least  some  of 
the  worst  forms  of  monopoly  in  the  not  distant 
future.  But  this  cannot  be  done  so  long  as  they  are 
unable  to  command  large  sums  of  money  through 
the  agency  of  loans.  It  is  quite  impossible  for 
governments  to  enter  upon  any  industrial  under- 
taking without  the  exercise  of  their  borrowing 
powers.  The  heaviest  taxation  which  the  people 
would  endure  would  not  suffice,  and  the  imposing 
upon  them  of  such  a  burden,  even  if  it  would  suf- 
fice, would  be  a  greater  evil  than  the  one  sought 
to  be  remedied. 

4.  A  fourth  occasion  for  the  use  of  State  credit 
may  be  found  in  the  need  of  the  people  for  institu- 
tions of  higher  education.  It  has  always  been  the 
policy  of  our  States  to  supply  the  rudiments  of  an 
education  to  our  people  free  of  cost  in  the  common 
schools;  and  it  is  now  quite  generally ' felt  that 


246  REPUDIATION  OF  STATE  DEBTS. 

each  State  should  endow  at  least  one  institution 
where  her  young  people  can  secure  a  liberal  edu- 
cation and  instruction  in  those  special  branches  a 
knowledge  of  which  is  essential  to  good  citizen- 
ship, or  to  an  adequate  preparation  for  the  higher 
industrial  activities  of  the  present  day.  Our  West- 
ern States  have  already  entered  upon  this  work  by 
the  establishment  of  State  universities,  but  some  of 
them  are  seriously  handicapped  by  their  inability 
to  secure  the  funds  needed  for  the  proper  equip- 
ment of  these  institutions.  Their  annual  support 
can  be  provided  for  by  current  taxation,  but  loans 
are  needed  to  construct  buildings,  to  supply  libra- 
ries, and  to  furnish  costly  apparatus.  The  demand 
for  loans  for  these  purposes  may  be  expected  to 
increase  in  the  future. 

These  and  other  considerations  which  might  be 
adduced  justify  us  in  questioning  the  wisdom  of 
the  policy  of  unduly  restricting  the  borrowing 
power  of  States.  Too  much  care,  of  course,  cannot 
be  taken  to  prevent  hasty  legislation  or  extrava- 
gance. Restrictions  upon  legislators,  the  aim  of 
which  is  to  compel  very  careful  consideration  by 
all  parties  concerned  of  every  bill  which  authorizes  a 
loan,  cannot  be  too  highly  commended;  but  the  same 
commendation  cannot  be  given  to  restrictions  which 
make  the  extensive  use  of  State  credit  an  impossi- 
bility, no  matter  how  great  the  emergency  may  be. 

The  only  object  of  such  restrictions  is  the  protec- 
tion of  the  people  against  their  own  representa- 


REMEDIES  FOR  REPUDIATION.  247 

tives.  Such  protection  is  necessary  and  desirable; 
but  in  the  matter  of  contracting  debts  it  can  best 
be  secured  by  the  use  of  the  referendum.  If  every 
bill  authorizing  a  loan  for  a  special  object  be  sub- 
mitted to  the  people  for  confirmation  or  rejection, 
they  cannot  be  imposed  upon  or  burdened  against 
their  will,  and  necessary  appropriations  for  public 
improvements  will  not  have  to  await  the  sIoav  and 
doubtful  processes  of  constitutional  amendment. 
This  plan  avoids  those  frequent  appeals  to  the 
people  for  changes  in  their  fundamental  law  which 
are  never  productive  of  good  results. 

The  inevitable  outcome  of  our  present  policy  is 
the  decadence  of  the  States  as  centres  of  adminis- 
tration, and  the  absorption  of  the  most  important 
functions  of  government  by  Congress  and  the  local 
political  units.  Such  a  result  is  to  be  deprecated 
as  a  menace  to  our  federal  system,  and  as  an 
unnecessary  strain  upon  our  Republican  institu- 
tions. ^ 

Whenever  our  States  shall  again  have  occasion 
to  borrow  on  a  large  scale,  the  desirability  of  reme- 
dies for  repudiation  will  become  apparent.  The 
remembrance  of  the  acts  of  repudiation  which 
have  been  described  will  not  be  effaced  by  the 
lapse  of  a  few  years ;  and  our  States  will  be  com- 
pelled to  grant  to  their  creditors  the  power  to  force 

I  See  Professor  Henry  C.  Adams's  able  presentation  of  the  need 
of  preserving  intact  tlie  borrowing  power  of  States  in  his  "  Public 
Debts,"  Part  III.,  chap.  iv. 


248  REPUDIATION  OF  STATE  DEBTS. 

them  to  pay  their  just  debts  —  so  far,  at  least,  as 
their  ability  will  permit  —  before  the  capital  of  the 
moneyed  classes  will  be  placed  at  their  disposal. 

Among  the  various  remedies  for  repudiation 
which  have  been  proposed,  two  should  hardly  be 
taken  seriously,  since  they  were  doubtless  sug- 
gested by  other  motives  than  a  desire  to  secure 
the  best  solution  of  the  problem.  The  suggestion 
made  in  the  public  press  at  one  time  that  States 
guilty  of  repudiation  be  deprived  of  their  repre- 
sentation in  Congress  belongs  to  this  category.  In 
the  first  place,  this  remedy  could  not  be  applied 
unless  an  entire  change  be  made  in  our  funda- 
mental law  and  in  the  nature  of  our  central  gov- 
ernment. In  the  second  place,  it  might  not  rem- 
edy the  evil  if  it  were  applied.  Unless  other 
measures  giving  the  federal  government  entire 
control  of  the  machinery  of  the  State  for  taxation 
purposes  should  accompany  it,  it  would  not  se- 
cure the  payment  of  the  repudiated  debt  in  the 
future. 

The  second  remedy  referred  to  was  suggested  by 
John  Quincy  Adams,  in  1843,  in  the  following 
resolutions  which  he  proposed  as  a  substitute  for 
those  presented  by  a  committee  of  the  House  of 
Representatives  of  which  he  was  a  member,  and  to 
which  had  been  referred  a  plan  for  the  assumption 
of  the  State  debts  :  — 

1.  Resolved,  That  the  repudiation  by  any  State  of  this  Union 
of  any  debt    to  foreigners,    contracted   by  authority   of  the 


REMEDIES  FOR  REPUDIATION.  249 

legislature  of  said  State,  is  a  violation  of  the  Constitution  of  the 
United  States,  in  the  first  paragraph  of  the  tenth  section  of 
the  first  article,  which  provides  that  no  State  shall  pass  any  law 
impairing  the  ohligation  of  contracts. 

Resolved,  That  if  any  State  of  this  Union,  by  or  in  conse- 
quence of  such  repudiation,  involve  herself  in  war  with  any 
foreign  power,  the  Congress  of  the  United  States  has  no  power 
to  involve  them  or  any  other  of  the  States  of  this  Union,  or 
the  people  thereof,  in  such  war. 

Resolved,  That,  in  the  event  of  such  a  war,  the  State  involv- 
ing herself  therein  will  cease  thereby  to  be  a  State  of  this  Union, 
and  will  have  no  right  to  aid  in  her  defence  from  the  United 
States,  or  any  one  of  them. 

These  resolutions  disclose  an  anomaly  in  our 
public  law  which  deserves  careful  attention  in  this 
connection.  Our  Constitution  places  the  power  of 
peace  and  war  with  the  federal  government,  and 
also  imposes  upon  it  the  duty  of  protecting  the 
States  of  the  Union  in  case  of  foreign  invasion. 
At  the  same  time  it  leaves  States  free  to  contract 
debts  either  at  home  or  abroad,  and  free  to  repu- 
diate them  if  they  so  desire.  In  this  freedom  is 
involved  tlie  possibility  of  a  foreign  war.  The 
law  of  nations  clearly  recognizes  the  right  of  a 
State  to  forcibly  seize  upon  the  property  of  another 
State,  or  to  make  war  against  her,  simply  for  the 
purpose  of  enforcing  the  payment  of  an  unsatis- 
fied debt  held  by  herself  or  any  of  her  citizens. 
Vattel  states  the  law  in  the  following  words  :  "  If 
one  nation  .  .  .  refuse  to  pay  a  debt,  repair  an 
injury,  or  give  satisfaction  to  another,  the  latter 
nation  may  seize  something  belonging  to  the  former 


250  REPUDIATION   OF  STATE  DEBTS. 

and  apply  it  to  her  own  advantage,  till  she  obtains 
payment  of  what  is  due  her,  together  with  interest 
and  damages."  ^  Another  authority  says  :  "  Fun- 
damentally .  .  .  there  is  no  difference  in  principle 
between  wrongs  inflicted  by  breach  of  a  monetary 
agreement  and  other  wrongs  for  which  the  State, 
as  itself  the  wrong-doer,  is  immediately  responsi- 
ble. The  difference  which  is  made  in  practice  is 
in  no  sense  obligatory ;  and  it  is  open  to  govern- 
ments to  consider  each  case  by  itself  and  to  act  as 
seems  well  to  them  on  its  merits."  ^ 

The  resolutions  of  John  Quincy  Adams  were 
very  likely  intended  to  bring  up  for  discussion  and 
remedy  in  Congress  the  anomaly  in  our  public  law 
which  has  been  noticed.^  As  a  remedy  for  repudi- 
ation they  are  open  to  the  serious  objection  of  sub- 
stituting the  greater  for  the  lesser  evil.  It  would 
unquestionably  be  better  for  us  as  a  nation  to 
undertake  the  settlement  of  a  case  of  a  repudiating 
State,  even  though  that  might  involve  the  use  of 
our  army  and  navy,  than  to  lose  her  from  the 
Union.  We  have  thought  it  worth  while  to  fight 
a  bloody  and  costly  war  in  order  to  preserve  our 
Union  intact,  and  no  one  would  be  so  silly  as  to 
propose  that  we  permit  it  to  fall  apart  on  account 
of  a  slight  defect  in  our  constitutional  law. 

The  scheme  which  carried  with  it  most  weight, 

1  '•  Law  of  Nations,"  Book  II.,  Sec.  342. 

2  William  E.  Hall's  "  International  Law,"  p.  237. 
»  See  Adams's  "  Public  Debts,"  pp.  25-27. 


REMEDIES  FOR   REPUDIATION.  251 

and  which  received  the  adherence  of  the  largest 
number  of  pei'sons  in  the  early  part  of  our  history, 
was  that  which  proposed  the  assumption  by  the 
federal  government  of  the  debts  of  the  States. 
This  scheme  was  not  calculated  simply  to  prevent 
repudiation  or  to  remedy  the  evil  after  it  had 
occurred.  It  was  designed  as  a  measure  of  relief 
for  all  the  States  which  had  burdened  themselves 
with  debts,  and  was  advocated  on  the  grounds  of 
justice  as  well  as  expediency.  It  was  formulated 
and  brought  before  Congress  by  William  Cost 
Johnson,  of  Maryland,  in  the  form  of  a  report  of 
a  select  committee  made  in  March,  1843.  The 
arguments  advanced  in  support  of  it  were  based 
upon  the  fact  that  the  greater  part  of  the  then 
State  debts  had  been  contracted  in  aid  of  public 
works,  and  upon  the  claim  that  these  public  works 
were  "  calculated  to  strengthen  the  bonds  of  union, 
multiply  the  avenues  of  commerce,  and  augment 
the  defences  from  foreign  aggression."  On  these 
grounds  it  was  claimed  that  it  was  just  and  proper 
for  the  federal  government  to  assume  these  debts. 
It  wiis  further  suggested  that  such  a  course  of 
action  would  relieve  the  citizens  of  these  States 
from  a  heavy  load  of  taxation,  and  remove  all 
danger  of  repudiation. 

Many  objections  to  this  plan  were  urged,  and 
these  proved  strong  enough  to  prevent  its  adoption 
by  Congress.  The  most  important  of  these  were 
the  following:  (1)   The  assumption  of  the  State 


252  REPUDIATION  OF  STATE  DEBTS. 

debts  would  bring  no  benefit  to  the  non-indebted 
States.  It  would  rather  injure  them  by  making 
them  bear  a  portion  of  the  debt  of  their  sisters. 
(2)  States  intrusted  with  federal  bonds  for  this 
purpose  might  apply  them  to  other  uses.  (3) 
If  the  States  were  relieved  of  their  present  dif- 
ficulties, they  would  speedily  become  indebted 
again.  (4)  Assumption  of  State  debts  would 
embarrass  the  federal  government. 

The  advocates  of  this  plan  met  the  first  objec- 
tion by  proposing  a  distribution  of  the  stock  to  be 
issued  by  the  federal  government  among  all  the 
States,  —  those  having  small  or  no  debts  as  well 
as  those  heavily  burdened,  —  in  proportion  to  their 
representation  in  Congress.  A  table  ^  was  drawn 
up  showing  how  much  each  State  would  receive 
according  to  this  plan,  but  it  was  not  successful 
in  winning  the  votes  of  the  States  which  were 
comparatively  free  from  debt.  To  overcome  the 
second  objection  it  was  proposed  that  bonds  should 
not  be  issued  to  the  States  directly,  but  to  bond- 
holders in  exchange  for  their  State  bonds.  The 
fear  that  the  States,  once  relieved  from  debt,  might 
at  once  proceed  to  burden  themselves  again,  and 
be  encouraged  in  so  doing  by  the  belief  that  the 
federal  government  would  again  shoulder  their 
burdens,  was  thought  to  be  groundless  in  view  of 
the  fact  that  the  States  least  indebted  at  that  time 
were  the  most  heavily  burdened   in  1791,  when 

1  See  Tenth  Census,  vol.  vii.  p.  528. 


REMEDIES  FOR  REPUDIATION.  253 

Hamilton's  policy  of  assumption  was  put  into 
execution.  It  was  also  believed  that  the  federal 
government  could  easily  relieve  itself  of  the 
debt  thus  assumed  by  levying  heavier  duties  on 
imported  goods. 

The  third  objection  was  unquestionably  a 
weighty  one,  and  one  not  to  be  dismissed  by 
mere  reference  to  the  effects  of  Hamilton's  as- 
sumption act.  To  establish  the  policy  of  federal 
assumption  of  State  debts  would  undoubtedly 
encourage  recklessness  and  extravagance  in  the 
States.  Indeed,  it  would  be  equivalent  to  giving 
a  State  legislature  the  power  to  appropriate  for  its 
use  moneys  out  of  the  federal  treasury.  Such  a 
policy  would  be  contrary  to  that  fundamental  prin- 
ciple of  Republican  government  which  places  the 
power  to  appropriate  money  and  the  responsibility 
for  its  expenditure  in  the  same  hands. 

Whatever  may  be  said,  however,  in  opposition  to 
this  plan,  it  remains  tlie  only  one  feasible  under 
the  present  conditions  of  our  public  law.  It 
would  be  much  better  for  the  federal  government 
to  assume  the  debts  of  States  than  to  accept  other 
possible  alternatives  such  as  the  allowing  her  credit 
to  be  seriously  impaired  by  their  defalcations  and 
repudiations,  or  the  defending  of  them  by  force  of 
arms  in  case  of  a  foreign  invasion. 

A  fourth  remedy  for  repudiation  was  suggested 
in  1883  by  Mr.  Moore  of  Tennessee.  He  intro- 
duced a  bill  into  Congress  which  provided  for  the 


254         REPUDIATION  OF  STATE  DEBTS. 

repeal  of  the  eleventh  amendment  to  the  Constitu- 
tion, and  for  the  granting  to  Congress  of  power  "  to 
provide  by  appropriate  legislation  for  the  legal  en- 
forcement of  contracts  entered  into  by  any  of  the 
States  of  the  Union."  Mr.  Moore's  bill  attracted 
very  little  attention  in  Congress  and  never  became 
a  law,  but  it  is  worthy  of  serious  consideration 
in  this  connection.  The  repeal  of  the  eleventh 
amendment  would  restore  that  article  of  the  Con- 
stitution which  provides  that  States  may  be  sued 
by  individuals  in  the  United  States  courts.  Cred- 
itors could  certainly  ask  for  no  better  regulation 
than  this  for  securing  a  judgment  concerning  the 
legality  of  their  bonds.  But,  having  secured  a 
favorable  judgment,  how  could  they  enforce  the 
payment  of  the  debts  due  them  ?  Mr.  Moore  pro- 
posed to  leave  to  Congress  the  solution  of  this 
difficult  problem,  and  consequently  his  bill  throws 
no  light  upon  it.  He  thus  left  the  most  important 
part  of  his  remedy  to  be  conjectured.  It  is  neces- 
sary to  our  discussion  that  we  inquire  how  States 
may  be  forced  to  pay  their  just  debts. 

In  searching  for  an  answer  to  this  question  we 
shall  find  it  profitable  again  to  examine  our  method 
of  dealing  with  cities  or  other  local  political  units 
which  repudiate  their  debts.  The  practice  of  our 
States  in  this  matter  is  not  uniform,  but  it  is  capa- 
ble of  being  explained  by  two  general  principles. 
Massachusetts  and  the  other  New  England  States 
hold  that  "judgments  against  a  quasi  corporation 


BEMEDIES  FOR  BEPUBIATION.  255 

may  be  satisfied  out  of  the  property  of  any  indi- 
vidual inhabitant."  ^  In  other  words,  these  States 
satisfy  the  just  claims  of  bondholders  by  attaching 
and  selling  the  property  of  individuals  who  are 
citizens  of  the  "quasi  corporation"  which  has 
repudiated  its  bonds. 

Other  States  resort  to  compulsory  taxation.  In- 
stead of  holding  individual  citizens  responsible, 
these  States  hold  the  corporation  itself  responsible, 
and  compel  its  officers  by  writ  of  mandamus  to 
collect  the  taxes  necessary  to  the  satisfaction  of  the 
debt.  This  procedure  may  be  defended,  says  Pro- 
fessor Henry  C.  Adams,^  on  the  ground  "that  when 
a  political  corporation  has  contracted  a  debt  or 
incurred  an  obligation,  it  has  already  taken  the 
initiatory  step  in  taxation,  and  has  in  effect  given 
its  consent  that  the  subsequent  steps,  so  far  as  they 
may  be  essential  to  the  discharge  of  such  a  debt  or 
obligation,  may  be  taken." 

Both  of  these  methods  are  feasible  and  efficient 
when  employed  against  cities  and  other  subordi- 
nate political  units,  but  would  they  work  equally 
well  against  repudiating  States  ? 

It  must  be  admitted  that  such  methods  of  pro- 
cedure would  be  entirely  without  precedent,  if  we 
except  the  military  governments  established  in  the 
seceding  States  at  the  close  of  the  Civil  War ;  that 
they  would  strike  a  blow  at  the  legislative  inde- 

1  Adams's  "  Public  Debts,"  p.  297. 

2  Ibid.,  p.  297. 


256         BEPUblATION  OF  STATE  DEBTS. 

pendence  of  States ;  and  that  they  would  weaken 
what  remains  of  State  sovereignty.  But  do  these 
facts  constitute  valid  objections  to  the  remedy 
which  they  propose  ?  Is  that  feature  of  legis- 
lative independence  which  makes  it  possible  for 
a  State  to  repudiate  her  debts  —  and  that  is  the 
only  feature  touched  by  this  remedy  —  desirable  ? 
Would  not  the  States  be  the  gainers  by  the  relin- 
quishment of  this  shadow  of  sovereignty  for  the 
substance  of  a  good  credit?  Our  States  have  been 
foolishly  sensitive  to  infringements  upon  their  so- 
called  dignity.  They  have  regarded  it  as  a  humil- 
iation unworthy  of  them  to  be  forced  to  appear 
as  defendants  in  a  court  of  justice.  A  sovereign 
State,  it  has  been  said,  would  not  disgrace  herself 
by  refusing  to  do  justice  to  all  Avith  whom  she  has 
dealings.  But  in  the  face  of  the  fact  that  they 
have  repeatedly  done  injustice  to  bondholders, 
and  that  too  without  good  reason,  of  what  advan- 
tage is  this  assumption  of  dignity !  Other  States, 
Prussia,  for  example,  voluntarily  submit  themselves 
to  such  indignities,  even  in  matters  of  far  less 
moment  than  those  which  we  are  considering. 

It  is  difBcult  to  see  wherein  the  States  would 
suffer  injury  by  the  application  to  them  of  the  rem- 
edy in  question.  Of  course  the  mere  fact  that  the 
payment  of  bonds  adjudged  valid  could  be  enforced 
would  remove  all  necessity  for  sucli  enforcement, 
for  no  State  would  war  against  the  inevitable  by 
refusing  to  provide  under  such  circumstances  for 


BEMEBIES  FOR  EEPUBIATION.  257 

the  payment  of  her  bonds.  Hence  the  disgrace 
of  being  forced  to  pay  debts  needs  never  to  be 
incurred. 

Two  positive  advantages  would  follow  the  adop- 
tion of  this  remedy.  State  bonds  would  find  ready 
sale  in  the  markets  of  the  woi'ld  at  low  rates  of 
interest,  for  the  two  essential  elements  of  the  high- 
est public  credit  would  then  be  present ;  namely,  a 
rapid  and  efficient  means  for  determining  the  valid- 
ity of  bonds  and  for  enforcing  their  payment,  and 
unquestioned  ability  to  pay.  With  the  possible 
exception  of  the  newest  of  our  Western  States, 
the  ability  of  our  States  to  pay  a  very  heavy  load 
of  indebtedness  cannot  be  questioned,  and  would 
not  be  questioned  by  capitalists.  The  second  ad- 
vantage consists  in  the  fact  that  in  repudiating  an 
illegal  and  unjust  debt,  States  would  have  the 
strong  backing  of  the  highest  judicial  tribunal  in 
this  country,  and  would  be  saved  the  expense,  the 
political  complications,  and  the  injury  to  public 
morality,  which  long-protracted  agitation  on  the 
subject  of  repudiation  is  sure  to  involve. 

A  further  defence  of  this  policy  may  be  found 
in  the  unquestionable  right  of  the  federal  govern- 
ment to  protect  its  own  credit.  The  repudiation 
of  debts  by  the  States  impairs  the  credit  of  the 
federal  government  as  well  as  their  own.  This 
was  demonstrated  by  the  failure  of  our  attempt 
to  make  a  European  loan  in  1842,  just  after  the 
announcement  by  Mississippi  of  her  intention  of 


25S  REPUDIATION  OF  STATE  DEBTS. 

repudiating  the  Union  Bank  bonds.  In  regard  to 
the  effect  upon  our  national  credit  caused  by  this 
and  the  failure  of  other  States  to  meet  their  inter- 
est payments,  our  commissioner  to  negotiate  the 
loan,  W.  Robinson,  Jr.,  made  the  following  state- 
ment :  "  In  my  intercourse  with  gentlemen  of  the 
highest  integrity  in  the  money  circles  of  London, 
whose  names  are  familiar  to  the  American  public,  I 
did  not  long  remain 4n  ignorance  of  the  prevailing 
sentiments  with  regard  to  the  object  of  my  solici- 
tude. The  defalcation  of  several  of  the  States  in 
the  payment  of  interest,  and  the  apprehension  that 
the  doctrine  of  repudiation,  as  it  is  termed,  may 
prevail  in  others,  has,  as  they  say,  produced  a  pre- 
judice so  deep  and  wide  that  until  the  doctrine  has 
been  abandoned  throughout  the  land,  American 
securities  must  remain  without  a  market  on  tlie 
other  side  of  the  Atlantic.  I  was  told  that  no 
house,  however  strong  and  influential  in  the  money 
market  of  Europe,  '  dare  venture  '  to  present  an 
American  loan  to  the  British  public,  with  the  slight- 
est hope  that  any  portion  of  it  would  be  taken  off 
their  hands.  And  although  they  professed  to  un- 
derstand the  nature  of  our  confederacy,  and  enter- 
tain full  confidence  in  its  resources  and  fidelity,  yet 
they  could  not,  they  said,  undertake  to  explain 
satisfactorily  to  their  friends,  on  whom  they  relied 
for  a  market,  the  distinction  between  State  securi- 
ties and  those  of  the  general  government;  and 
hence,  should  they  have  the  temerity  to  take  up 


REMEDIES  FOR  REPUDIATION.  259 

the  loan,  instead  of  being  able  to  diffuse  it  among 
their  pecuniary  constituents,  as  was  customary  in 
such  cases,  they  would  be  compelled  to  retire  it  as 
an  inactive  investment  on  their  bureaus." 

The  statements  of  European  financiers  to  Mr. 
Robinson  are  taken  from  his  letter  to  the  Secretary 
of  the  Treasury,  and  are  explanatory  of  the  failure 
of  his  mission.  In  another  part  of  his  letter  he 
expresses  the  opinion  that  the  motive  for  these 
statements  was,  in  part  at  any  rate,  the  desire  to 
induce  the  United  States  government  to  assume 
the  debts  of  the  States ;  but  he  afterwards  says 
on  his  own  responsibility  and  authority  that  "  the 
great  body  of  the  European  public,  who  are  the 
second-hand  purchasers  from  bankers,  do  not  under- 
stand the  difference  between  the  obligations  of  the 
States  and  those  of  the  federal  government.  With 
them  the  fact  that  one  State  has  failed  to  pay 
interest  due  is  an  argument  against  the  purchase 
of  any  obligation  to  which  that  State  is  a  party."  ^ 

It  is  highly  improbable  that  the  general  knowl- 
edge of  our  institutions  in  the  possession  of  the 
investing  public  of  Europe  has  increased  to  such 
an  extent  as  to  make  the  remark  of  Commissioner 
Robinson  inapplicable  to  our  day.  At  any  rate,  the 
credit  of  a  country  is  such  a  delicate  thing  that  a 
suspicion,  even  though  it  may  have  no  foundation 
in  fact,  is  sufficient  to  throw  it  into  disorder.  It 
cannot  be  doubted  that  the  general  repudiation  of 

1  Ex.  Doc.  Na  197,  Twenty-seventh  Congress,  3d  Session. 


260  REPUDIATION  OF  STATE  DEBTS. 

State  debts  at  the  present  time  would  make  it  diffi- 
cult to  place  a  national  loan  in  Europe,  if  that  should 
be  necessary  or  desirable.  In  view  of  this  fact  it 
may  be  argued  that  Congress  would  be  justified  in 
adopting  the  remedy  proposed,  or  any  other  one 
that  would  make  unjustifiable  repudiation  an  im- 
possibility. 

There  is  one  objection  of  a  practical  nature  to 
this  remedy  which  must  not  be  overlooked.  The 
repeal  of  the  eleventh  amendment  could  only  be 
accomplished  with  the  consent  of  the  States ;  and 
it  is  highly  improbable  that  an  act  of  this  sort 
would  receive  the  number  of  votes  requisite  to 
make  it  a  law.  The  love  of  the  remnant  of  State 
sovereignty  still  possessed  by  the  States,  and  the 
fear  of  unduly  increasing  the  power  of  the  federal 
government,  are  probably  still  too  strong  to  admit 
of  the  passage  of  so  radical  a  measure.  The 
remedy,  therefore,  which  would  be  practicable  in 
the  present  state  of  public  opinion,  must  not  inter^ 
fere  with  the  present  relation  existing  between  the 
States  and  the  federal  government. 

A  remedy  similar  to  the  one  under  discussion 
is  possible,  which  is  not  subject  to  the  objections 
just  mentioned.  Each  State  might  provide  by 
constitutional  amendment,  or  otherwise,  for  the 
adjudication  by  her  own  courts  of  cases  to  which 
she  is  a  party,  and  which  involve  the  question  of 
the  validity  of  lier  bonds.  She  miglit  then  invest 
her  courts  with  tlie  power  to  issue  writs  of  manda- 


REMEDIES  FOR  REPUDIATION,  261 

mus  against  the  officers  intrusted  with  the  collec- 
tion of  taxes,  compelling  them  to  include  in  their 
assessments  an  amount  sufficient  to  cover  the  debts 
adjudged  valid.  Another  writ  compelling  the 
treasurer  to  pay  to  the  creditor  the  money  thus 
collected  for  his  benefit,  would  complete  the  trans- 
action. The  laws  necessary  to  the  carrying  into 
execution  of  this  plan  could  be  more  easily  secured 
than  the  repeal  of  the  eleventh  amendment,  and 
representing,  as  they  would,  an  honest  purpose  and 
a  desire  on  the  part  of  the  States  to  do  justice  to 
their  creditors,  they  would  furnish  a  solid  founda- 
tion for  the  State  credit,  and  erect  an  effectual 
barrier  against  repudiation.  Most  of  the  argu- 
ments presented  in  favor  of  the  last-mentioned 
remedy  would  apply -equally  well  to  this  one.  It 
is  practicable ;  it  would  be  efficient ;  it  would 
satisfy  every  demand  which  the  federal  govern- 
ment has  a  right  to  make  with  a  view  to  the 
preservation  of  her  own  credit;  and  it  would 
interfere  in  no  way  with  the  independence  and 
true  dignity  of  the  States. 

There  is  an  objection,  however,  to  this  and  to 
every  plan  which  aims  at  compelling  States  in  all 
cases  to  pay  debts  which  have  been  adjudged  valid 
by  the  courts.  A  State,  as  well  as  an  individual, 
may  become  bankrupt.  The  claim  has  frequently 
been  made  in  behalf  of  our  Southern  States  that  they 
were  unable  to  pay  their  debts  in  full.  Prominent 
men  in  Virginia  have  persistently  claimed  that  if 


262  BEPUDIATION  OF  STATE  DEBTS. 

the  State  should  attempt  to  meet  her  interest  obli- 
gations as  they  were  defined  in  the  funding  act  of 
1871,  she  would  be  unable  to  provide  education  for 
her  youth  and  support  for  her  charitable  and  penal 
institutions.  It  must  be  admitted  that  States  have 
duties  and  obligations  which  come  before  those 
of  debt  payment.  If  the  claim  of  these  Virginians 
is  sound,  we  must  admit  that  their  State  would  be 
justified  in  scaling  her  debts  or  even  in  repudiating 
a  portion  of  them.  The  first  duty  of  a  State  is 
self-preservation,  and  for  that  the  education  of  her 
youth  and  the  proper  punishment  of  her  criminals 
are  necessary. 

In  view  of  these  facts,  in  any  remedy  proposed, 
some  provision  should  be  made  for  determining 
the  ability  of  the  State  to  pay,  and  for  adjusting 
her  debts  to  her  abilities  in  case  she  has  become 
overburdened.  In  applying  the  remedy  last  pro- 
posed, the  courts  might  be  empowered  to  pass  judg- 
ment on  these  points,  and,  in  case  the  State  were 
bankrupt,  to  determine  how  much  the  creditors 
should  receive.  If  it  were  thought  undesirable  to 
intrust  such  matters  to  the  ordinary  courts,  a  spe- 
cial tribunal  might  be  provided  for  this  purpose, 
and  for  the  adjudication  of  the  validity  of  bonds 
and  the  issue  of  the  writs  compelling  the  collec- 
tion of  an  adequate  tax  and  its  payment  to  the 
bondholders. 

A  special  tribunal  of  this  sort,  however,  would 
be  more  susceptible  to  corrupt  influences  than  ordi- 


REMEDIES  FOR  REPUDIATION.  263 

nary  courts,  and  less  apt  to  take  into  consideration 
all  the  interests  and  equities  involved.  An  ideal  tri- 
bunal Avould  be  a  court  made  up  of  judges  appointed 
for  life,  or  during  good  behavior,  who,  like  the 
judges  of  the  Supreme  Court  of  the  United  States, 
are  removed  as  far  as  possible  from  the  influences 
of  party  prejudice  and  political  considerations.  Su- 
pieme  courts  of  States,  whose  judges  partake  of 
this  character,  are  best  fitted  to  undertake  the  deli- 
cate and  responsible  duties  suggested.  In  no  case 
should  the  appointment  of  such  tribunals  be  left 
to  State  legislatures.  Experience  has  demonstrated 
that  these  bodies  often  fail  to  deal  justly  with 
creditors,  or  to  adopt  those  measures  which  make 
for  the  best  interests  of  the  State.  Great  wisdom, 
calm  reflection,  and  intimate  knowledge  of  the  law 
and  facts  involved,  freedom  from  every  influence 
of  a  corrupting  or  political  nature,  should  be  the 
qualifications  of  men  intrusted  with  such  duties, 
and  these  qualifications  are  more  apt  to  be  found 
in  judges  than  in  legislators. 

In  closing  this  chapter  it  is  fitting  to  make  men- 
tion of  the  most  obvious  and  most  efficient  remedy 
of  all;  namely,  the  inculcation  of  a  high  standard 
of  morality  into  the  minds  and  convictions  of  tlie 
people.  Every  citizen  should  regard  a  public 
debt  as  a  sacred  obligation,  and  should  resent  its 
repudiation  as  a  personal  disgrace.  The  American 
people  appreciate  fully  the  importance  of  good 
personal  credit,  and  are  keenly  susceptible  to  the 


264  BEPUDIATION  OF  STATE  DEBTS, 

disgrace  which  attends  failure  to  meet  personal 
obligations.  When  they  shall  have  as  fine  an 
appreciation  of  the  value  of  public  credit,  and  as 
keen  a  susceptibility  to  the  disgrace  of  public  defal- 
cation, the  danger  of  repudiation  will  have  been 
reduced  to  a  minimum. 

Our  shortcomings  in  this  country  are  chiefly  the 
result  of  thoughtlessness  and  ignorance  on  the  part 
of  the  masses.  Our  people  are  honest  at  heart, 
and  desirous  of  doing  what  is  right  in  public  as 
well  as  private  matters.  They  need  a  better 
knowledge  of  the  social  and  economic  necessities 
of  a  great  people  like  that  of  the  United  States, 
and  of  the  relation  of  individual  prosperity  and 
well-being  to  public  honesty  and  public  justice. 
The  public  press  and  the  schools,  colleges,  and 
universities  of  our  country  have  it  in  their  power 
to  furnish  us  the  most  efficient  remedy  against 
repudiation. 


APPENDIX  I. 

SOURCES  OF  INFORMATION. 

Mississippi. 

Laws  of  Mississippi  for  1838,  18-iO,  and  1842. 

Journals  and  Reports  of  Committees  of  the  Mississippi 
Legislature. 

Mississippi  Reports :  C  II,  625 ;  2  C,  468,  471 ;  3  C,  625. 

Bankers''  Magazine :  "  Origin  of  Repudiation  in  Missis- 
sippi," by  P.  W.  Chandler,  —  December,  1846,  p.  337 ; 
"On  the  Effects  of  Repudiation,"  by  J.  J.  Speed,  —  No- 
vember, 1846,  p.  309;  "History  of  Repudiation  in  Mis- 
sissijjpi,"  —  November,  1849,  p.  337;  "Correspondence 
between  Hope  &  Company,  Amsterdam,  and  Governor 
McNutt,"  —  November,  1849,  p.  345 ;  "  Letter  from  Jeffer- 
son Davis,"— November,  1849,  p.  363;  "Reply  of  the 
London  Times,"  —  September,  1849,  p.  247;  "Remarks  of 
London  Morning  Chronicle  on  Repudiation  in  the  United 
States," — December,  1850,  p.  454;  "Remarks  of  the  Lon- 
don Times  on  the  Appeal  to  the  Court  of  Mississippi,"  — 
April,  1851,  p.  857;  "Remarks  on  Repudiation  in  Missis- 
sipi)i  and  the  Insolvency  of  her  Banks,"  —  December,  1852, 
p.  420 ;  "  Results  of  the  Popular  Vote  in  November,  1852, 
on  Paying  the  State  Bonds,"  —  December,  1852,  p.  484; 
"  Statement  of  the  Planters'  Bank  debt  and  the  Union  Bank 
debt,  with  table  of  annuity  required  to  extinguish  both,"  — 
January,  1853,  p.  497;  "Opinion  of  the  Chancellor  of  the 
State  of  Mississippi  on  the  Legality  of  the  Union  Bank 
Bonds,"  —  April,  1853,  p.  829;  "Southern  Views  of  Repu- 

265 


266  APPENDICES. 

diation,"  —  August,  1853,  p.  99 ;  •'  Correspondence  between 
Merchants  of  Jackson,  Miss.,  and  Messrs.  Adams  &  Dixon, 
Attorney  for  Claimants  on  Planters'  Bank  Bonds," —  Novem- 
ber, 1853,  p.  431;  "Letter  from  William  C.  Smedes  of 
Mississippi  on  the  Legality  of  the  Union  Bank  Bonds,"  — 
December,  1853,  p.  491. 

"  Report  of  the  Bank  Commissioners  to  the  Legislature 
of  the  State  of  Mississippi,  delivered  Jan.  4,  1840."  Jack- 
son, 1840. 

'* Nine  Years  of  Democratic  Rule  in  Mississippi;  being 
notes  upon  the  political  history  of  the  State  from  the  be- 
ginning of  the  year  1838  to  the  present  time."  Jackson, 
1847. 

Davis,  Reuben,  "  Recollections  of  Mississippi  and  Missis- 
sippians,"  chap.  xiv. 

Lowry,  R.  and  McCardle,  W.  H.,  "A  History  of  Missis- 
sippi," Jackson,  1891. 

Florida. 

Laws  of  Florida,  1833. 

Proceedings  of  the  Territorial  Legislature  for  1841. 

Ex.  Doc.  No.  409,  1st  Sess.  24th  Cong.,  vol.  vi. ;  Ex.  Doc. 
1st  Sess.  26th  Cong.,  vol.  v. ;  Ex.  Doc.  No.  Ill,  2d  Sess. 
26th  Cong.,  vol.  iv. ;  Ex.  Doc.  No.  226,  1st  Sess.  29th  Cong., 
vol.  viii. 

Bankers'  Magazine:  "Case  of  Repudiation  of  Debt  by 
Florida,"  —  December,  1857,  p.  449. 

Commercial  and  Financial  Chronicle :  Feb.  8,  March  22, 
July  5,  and  Sept.  6,  1873 ;  March  4,  1876 ;  Jan.  6  and  June 
2,  1877 ;  and  Jan.  22,  1881. 

Alabama.  » 

Laws  of  Alabama  for  1865-66,  1866-67, 1868,  1870,  1871, 
1872,  1873,  1874,  and  1876. 
Reports  of  the  Auditor  for  1869,  1870,  1872,  and  1875. 


APPENDICES.  267 

Reports  of  the  Treasurer  for  1866-67, 1867-68,  and  1868-69. 

Report  of  the  Comptroller  of  Public  Accounts  for  1866. 

*' Message  of  David  P.  Lewis,  Governor  of  Alabama,  to 
the  General  Assembly,  Nov.  17, 1873."    Montgomery,  1873. 

Commercial  and  Financial  Chronicle:  Jan.  7,  Feb.  4, 
and  Dec.  2  and  23,  1871 ;  Feb.  17,  March  16,  May  4  and  18, 
July  6,  Sept.  14,  and  Dec.  14,  1872;  Jan.  11,  March  1,  and 
April  19,  1873;  Jan.  24,  June  20,  and  Dec.  5  and  19,  1874; 
June  12  and  19,  and  Sept.  18  and  25,  1875 ;  Jan.  29  and 
Feb.  12,  1876. 

North  Carolina. 

Laws  of  North  Carolina  for  1865, 1866,  1868,  1870,  1875, 
and  1879. 

"Annual  Message  of  Governor  T.  R.  Caldwell,  1873." 
Raleigh,  1873. 

Commercial  and  Financial  Chronicle :  June  13,  1868 ; 
April  10  and  Sept.  11,  1869;  Dec.  10,  1870;  March  4,  June 
24,  Sept.  23,  and  Dec.  2,  1871;  Nov.  23,  1872;  June  21, 
Nov.  1  and  22,  and  Dec.  13,  1873 ;  Feb.  14,  1874 ;  Jan.  9 
and  23,  Feb.  13,  April  3,  and^Dec.  18,  1875 ;  Dec.  16  and  30, 
1876;  Jan.  6  and  20  and  March  10,  1877;  Dec.  28,  1878; 
Jan.  18,  Feb.  22,  and  March  29,  1879 ;  and  July  10,  1880. 

Bowlby,  Wilson  H.,  "North  Carolina,  Its  Debt  and  Fi- 
nancial Resources."    New  York,  1869. 

Moore,  J.  W.,  "  History  of  North  Carolina."    2  volumes. 

South  Carolina. 

Acts  of  South  Carolina  for  1866,  1868,  1869,  1871,  1872, 
1873-74,  1877,  1877-78,  and  1879. 

South  Carolina  Reports  :  12  S.  C.  294. 

Senate  Journal  of  South  Carolina  for  the  Session  1871-72, 
pp.  8  and  260. 


268  APPENDICES. 

"Report  of  the  Joint  Special  Financial  Investigating 
Committee  appointed  by  the  General  Assembly  at  its  Regu- 
lar Session,  1870-71." 

Reports  of  the  Comptroller  General  for  1870-71  and  1875. 

"Message  of  Governor  Robert  K.  Scott  to  the  General 
Assembly,  1870-71.""  — Senate  Journal  of  South  Carolina 
for  the  Session  of  1871-72. 

"  Special  Message  of  Governor  Robert  K.  Scott  in  reply 
to  charges  made  against  him."    Columbia,  S.C,  1872. 

"Inaugural  Address  of  Governor  D.  H.  Chamberlain  de- 
livered before  the  General  Assembly  of  South  Carolina, 
Dec.  1,  1874."    Columbia,  1874. 

"Report  of  the  Joint  Investigating  Committee  on  Public 
Frauds  and  Election  of  Hon.  J.  J.  Patterson  to  the  United 
States  Senate,  made  to  the  General  Assembly  of  South  Car- 
olina at  the  Regular  Session,  1877-78."    Columbia,  1878. 

"  Reply  of  the  State  Treasurer  to  the  Special  Joint  Com- 
mittee." 

Atlantic  Monthly:  "The  Political  Condition  of  South 
Carolina,"  —  February,  1877. 

"Address  of  Colonel  Richard  Lathers,  delivered  before 
the  New  England  Society  of  Charleston  on  Forefathers' 
Day,  Dec.  22,  1873."    Charleston,  1874. 

Allen,  Walter,  "  Governor  Chamberlain's  Administration 
in  South  Carolina.  A  Chapter  of  Reconstruction  in  the 
Southern  States."  G.  P.  Putnam's  Sons,  New  York  and 
London,  1888. 

Commercial  and  Financial  Chronicle:  March  11,  Nov.  11, 
and  Dec.  2,  1871 ;  Mar.  23,  Aug.  3, 17,  and  24,  and  Nov.  23, 
1872 ;  March  15,  Aug.  23  and  30,  Sept.  6  and  13,  and  Nov. 
8  and  15,  1873;  May  9  and  IG,  June  13,  and  July  11,  1874; 
Jan.  5  and  23,  March  G  and  30,  April  10  and  17,  May  22, 
Sept.  4,  Nov.  20,  and  Dec.  4  and  25,  1875;  Jan.  8,  Feb.  19, 


APPENDICES.  269 

March  4,  and  July  8  and  15,  187G ;  March  3,  April  28,  May 
12,  June  16,  and  July  28,  1877 ;  Dec.  21,  1878;  Jan.  4  and 
Oct.  11,  1879. 

Georgia. 

Laws  of  Georgia  for  1869,  1870,  1871,  1872,  1875,  1876, 
and  1877. 

"  Georgia's  Repudiated  Bonds.  Bondholders'  Side  of 
the  Question." 

Lochrane,  O.  A.,  "Brief  on  Georgia  Repudiation  of  the 
Bonds  of  the  Brunswick  and  Albany  Railroad." 

Lochrane,  O.  A.,  "Argument  on  Georgia  Repudiation 
before  Hon.  W.  A.  Poste,  Attorney  General  of  New  York 
State." 

Calhoun,  Pat.,  and  Hammond,  Hon.  N.  J.,  "Arguments 
before  Hon.  W.  A.  Poste." 

O'Brien,  D.,  "Communication  to  Hon.  Willis  S.  Paine, 
Superintendent  of  Banks  in  New  York  State." 

"Annual  Report  of  the  Superintendent  of  Public  Works 
upon  the  State  Aid  Railroads  for  the  year  ending  Oct.  1, 
1871."    Atlanta,  1871. 

Commercial  and  Financial  Chronicle :  March  25,  July  22, 
and  Dec.  16,  1871;  Aug.  8  and  Sept.  28,  1872;  Feb.  8  and 
March  1,  1873;  Oct.  10,  1874;  Supplement,  July  31,  1875; 
July  28,  1877. 

Avery,  I.  W.,  "The  History  of  the  State  of  Georgia 
from  1850  to  1881."    New  York,  1881. 

Lotiisiana. 

Laws  of  Louisiana  for  1866,  1867,  1868,  1869, 1870,  1874, 
1875,  1882,  and  1884. 

Louisiana  Reports :  23  La.  402;  27  La.  219,  249;  28  La. 
249. 


270  APPENDICES. 

"Message  of  Governor  S.  D.  McEnery  to  the  General 
Assembly  of  the  State  of  Louisiana.  Regular  Session  of 
1882."     Baton  Rouge,  1882. 

Messages  of  Governor  McEnery  to  the  Special  Session  of 
1871 ;  also  messages  of  Governors  Kellogg,  Warmoth,  and 
Packard. 

"  Address  of  Governor  Kellogg  to  the  PeojDle  of  the 
United  States  on  the  Condition  of  Affairs  in  Louisiana,  with 
Official  facts  and  Figures." 

"  Annual  Message  of  his  Excellency,  Governor  William 
Pitt  Kellogg,  to  the  General  Assembly  of  Louisiana.  Ses- 
sion of  1874."     New  Orleans,  1874. 

"Report  of  the  Committee  on  Public  Debt."  Official 
Journal  of  the  Proceedings  of  the  Constitutional  Convention 
of  1879. 

"House  Misc.  Doc.  No.  211,  42d  Cong.,  2d  Session." 

"Protest  of  the  State  of  Louisiana  to  the  Senate  of  the 
United  States." 

Braofdon,  O.  D.,  "  Facts  and  Figures,  or  Useful  and  Im- 
portant  Information  for  the  People  of  Louisiana."  New 
Orleans,  1872. 

Commercial  and  Financial  Chronicle:  Feb.  23,  1867; 
March  18,  April  1,  and  May  27,  1871  ;  June  7,  1873;  Jan. 
17,  Feb.  7  and  14,  June  6,  Aug.  15,  and  Sept.  19, 1774 ;  Jan. 
23,  May  29,  June  5,  July  31,  Sept.  4,  Nov.  6,  and  Dec.  25, 
1875;  Jan.  15,  April  1  and  22,  and  Nov.  25,  1876;  July  28, 
1877;  Jan.  11,  May  24,  June  21  and  28,  July  19,  Sept.  13, 
and  Dec.  13,  1879;  Jan.  10  and  Dec.  11,  1880;  May  17  and 
July  5,  1884. 

Arkansas. 

Acts  of  Arkansas  for  1866-67,  1868-69,  1873,  1874-75, 
1879,  and  1883. 
Reports  of  Arkansas  :  31  Arkansas,  701. 


APPENDICES.  271 

**  Message  of  Governor  Elisha  Baxter  to  the  General  As- 
sembly of  Arkansas."    Little  Rock,  1873. 

♦♦Inaugural  Address  of  Hon.  W.  R.  Miller,  Governor- 
Elect  of  the  State  of  Arkansas,  January,  1877."  Little 
Rock,  1877. 

♦♦Debates  and  Proceedings  on  the  Bill  entitled  An  Act  to 
Provide  for  the  Funding  of  the  Public  Debt  of  the  State  in 
the  House  of  Representatives  of  the  State  of  Arkansas, 
together  with  the  Act."    Little  Rock,  1869. 

Auditor's  Reports  for  1864,  1865,  1866,  1868,  and  1870. 

Commercial  and  Financial  Chronicle:  Oct.  2,  1869;  Jan. 
20  and  Aug.  10,  1872 ;  April  4,  Aug.  15  and  22,  and  Dec. 
19,  1874 ;  Feb.  6  and  Nov.  13,  1875 ;  Jan.  27,  May  5,  and 
Aug.  18, 1877 ;  Feb.  15,  March  15,  and  July  6  and  13,  1878 ; 
Aug.  21  and  Sept.  18,  1880 ;  Sept.  24  and  Nov.  12,  1881 ; 
Jan.  6,  June  23  and  30,  and  Oct.  6,  1883 ;  Aug.  23  and 
Sept.  6,  1884;  Jan.  24  and  Oct.  10,  1885;  April  2,  1887. 

Bankers'  Magazine:  Case  of  Repudiation  by  Arkansas 
on  her  State  Bonds,  — December,  1854,  p.  488. 

Tennessee. 

Acts  of  Tennessee  for  1868-69,  1869-70,  1870-71,  1871, 
1872,  1873,  1875,  1877,  1879,  1881,  and  1883. 

♦'  The  State  Debt.  Report  of  the  Committee  appointed 
to  investigate  it."  Appendix  to  Senate  Journal  of  Tennes- 
see for  1879. 

Messages  of  Governors  Porter  and  ISIarks.  Senate  Jour- 
nal of  Tennessee  for  1879. 

Message  of  Governor  Alvin  Hawkins  to  the  Forty-third 
General  Assembly,  Jan.  3,  1883.  Appendix  to  Senate  Jour- 
nal for  1883. 

Message  of  Governor  William  B.  Bate  to  the  Extra  Session 
of  the  Forty-fourth  General  Assembly,  May  25,  1885.  Sen- 
ate Journal,  Extra  Session,  1885. 


272  APPENDICES. 

Commercial  and  Financial  Chronicle:  Oct.  1,  July  2,  and 
Nov.  12,  1870;  Jan.  28,  Oct.  28,  and  Nov.  4  and  11,  1871 ; 
April  20, 1872 ;  Feb.  8,  March  22,  April  5,  and  May  10,  1873 ; 
March  7,  May  10,  and  Aug.  15, 1874 ;  Jan.  23,  Feb  13,  May 
22,  July  3,  12,  and  24,  and  Dec.  18  and  25,  1875;  May  13, 
April  1  and  22,  June  3,  July  1,  Aug.  26,  and  Supplement, 
Sept.  30,  1876  ;  Jan.  13,  Supplement,  April  28,  Nov.  10,  and 
Dec.  15  and  22,  1877 ;  Oct.  26  and  Dec.  7  and  28,  1878 ; 
Jan.  11,  Feb.  15  and  22,  April  5,  May  3,  and  July  26,  1879 ; 
Sept.  18  and  Oct.  2,  1880 ;  Jan.  15,  1881 ;  Feb.  25,  April  22, 
May  27,  Oct.  21,  and  Dec.  30,  1882;  Jan.  6  and  Feb.  10, 
1883. 

Minnesota. 

Laws  of  Minnesota  for  1857, 1858, 1859-60,  1861-62, 1862, 
Extra  Session  1862,  1866,  1867,  1869,  and  1871. 

Minnesota  Reports:  Vol.  ii.,  p.  13,  and  vol.  xxix.,  p. 
474. 

Messages  of  Governors  C.  K.  Davis  and  J.  S.  Pillsbury 
to  the  Legislature  of  Minnesota,  delivered  Jan.  7,  1876. 

"Minnesota  State  Bonds."    New  York,  1871. 

Neill,  E.  D.,  "  The  History  of  Minnesota  from  the  Earliest 
French  Explorations  to  the  Present  Time."  3d  cd.,  Min- 
neapolis, 1878. 

Michigan. 

Laws  of  Michigan  for  1837,  1842,  and  1843. 

Hunt's  Merchants'  Magazine:  "Debts  and  Finances  in 
Michigan,"  February,  1850. 

Cooley,  T.  M.,  "Michigan"  (American  Commonwealth 
Series),  chap.  xiv. 

Virginia. 

Acts  of  Virginia  for  1870-71,  1871-72,  1872-73,  1874, 
1874-75,  1875-76,  1876-77,  1878-79,  1881-82,  1883-84, 
1885-86,  1887,  and  1891-92. 


APPENDICES.  273 

Virginia  Reports :  22  Gratt.  833. 

'♦  The  State  Debt  and  how  to  pay  it.' 

"Proceedings  of  a  Conference  with  Virginia  Creditors, 
including  an  Exposition  of  the  Debt,  Finances,  and  Taxation 
of  the  State  by  the  Governor  on  the  tenth  day  of  November, 
187-4."    Richmond,  1874. 

'*  Address  of  the  Re-adjuster  State  Executive  Committee." 
Petersburgh,  Va.,  1883. 

Marshall,  Wm.,  "Repudiation  in  Virginia."  London, 
1889. 

American  Law  Review:  "Coupon  Legislation  of  Vir- 
ginia," by  Morris  Gray.     Vol.  xxiii.,  p.  924. 

North  American  Review:  "Repudiation  in  Virginia,"  — 
February,  1882. 

The  Richmond  Newspapers. 

Commercial  and  Financial  Chronicle:  March  4  and  25. 
July  29,  Sept.  22,  and  Dec.  16  and  23,  1871 ;  Jan.  4, 13,  and 
18,  Feb.  1,  March  1,  15,  and  22,  April  5,  June  14,  and  Dec. 
22,  1872;  Dec.  13,  1873;  April  4  and  25,  May  2  and  23, 
June  6  and  13,  Sept.  19,  and  Nov.  7,  14,  and  21,  1874;  Jan. 
2,  April  10,  June  5,  and  Dec.  4  and  25,  1875 ;  Jan.  22  and 
Dec.  16,  1876 ;  Aug.  U,  1877 ;  Feb.  9  and  23,  March  9  and 
16,  April  6  and  27,  Oct.  12  and  Dec.  14,  1878;  Feb.  14 
and  28,  March  6,  and  May  1,  1880;  Jan.  29  and  Nov.  19, 
1881 ;  Jan.  21,  Feb.  11,  April  1,  May  13,  June  24,  July  8, 
15,  and  22,  and  Nov.  25,  1882 ;  March  10,  17,  and  24,  April 
21,  May  19,  Sept.  8,  Oct.  13,  and  Dec.  8,  1883;  April  12, 
May  10,  Aug.  16,  and  Sept.  20, 1884 ;  March  7,  April  25,  and 
May  30, 1885 ;  Jan.  16,  Feb.  6  and  20,  April  10,  and  Oct.  9, 
1886 ;  April  16  and  23,  May  7  and  14,  Oct.  15,  and  Dec.  10, 
1887;  Oct.  26  and  Jan.  5,  1889. 

General  and  Other  Sources. 
Landon's"The  Constitutional  History  and  Goveniment 
of  the  United  States." 


274  APPENDICES. 

North  American  Review:  "The  Constitutionality  of  Re- 
pudiation," by  D.  H.  Chamberlain  and  John  S.  Wise, — 
March,  1884;  '* Debts  of  the  States,"  by  Judge  Curtis,— 
January,  1884 ;  "  Responsibility  for  State  Roguery,"  —  vol. 
exxxix.,  p.  563;  "Are  We  a  Nation  of  Rascals?"  — 
August,  1884. 

Hume,  J.  J.,  "  Repudiators  and  the  Federal  Treasury." 
—  Nation,  vol.  xxv.,  p.  5. 

Poore's  Manual  of  Constitutions. 

Porter,  R.  P.,  "  State  Debts  and  Repudiation."  —  Inter- 
national Review,  November,  1880. 

History  of  State  Debts.  — Tenth  Census,  vol.  vii. 

Adams,  H.  C,  "  Public  Debts." 

Green,  George  W.,  Article  "Repudiation"  in  Lalor's 
Cyclopsedia. 

Green,  George  W.,  "Repudiation." — Economic  Tracts 
No.  11,  published  by  the  Society  for  Political  Education. 

Burroughs's  "  Law  of  Public  Securities." 

Supreme  Court  Reports:  6  Cranch.  87;  7  Cranch.  164 
166 ;  6  Wheat.  391 ;  8  Wheat.  1,  84 ;  9  Wheat.  738 ;  12  Wheat 
370 ;  4  Pet.  514,  560 ;  1  How.  311 ;  2  How.  608,  612 ;  6  How 
301,327;  10  How.  190,  207;  17  How.  520;  18  How.  384 
2  Dallas,  419;  1  Block,  436;  4  Wall.  535^  10  Wall.  511 
L3  Wall.  646;  14  Wall.  661;  15  Wall.  610;  16  Wall.  203 
92  U.  S.  432,  438;  101  U.  S.  693;  102  U.  S.  203,  206,  672 
103  U.  S.  358,  367 ;  105  U.  S.  278 ;  107  U.  S.  769 ;  108  U.  S 
76;  114  U.  S.  286,270,  665;  116  U.  S.  650,  567,  572,  585 
731 ;  and  135  U.  S.  667. 


APPENDICES. 


275 


APPENDIX  11. 


STATISTICAL  TABLES. 


A. 

Table  showing  fluctuations  in  the  value  of  State  securities 
from  1872  to  1879  inclusive,  with  tlie  avei*ao:e  value  for  the 


same  time.^ 

Av- 
er- 

States 

1872 

1873 

1874 

1875 

1876 

1877 

1878 

1879 

age 

Maine      .     .     . 

.      100 

100 

100 

100 

100 

100 

100 

100 

100 

New  Hampshire 

.      100 

100 

100 

100 

100 

100 

100 

100 

100 

Vermont      .     . 

.      100 

100 

100 

100 

100 

100 

100 

100 

100 

Massachusetts  . 

.      103 

103 

103 

103 

103 

103 

103 

103 

103 

lihode  Island    . 

99 

99 

99 

102 

107 

110 

105 

110 

104 

Connecticut 

99 

99 

99 

103 

105 

109 

106 

106 

103 

New  York   .     . 

104 

105 

106 

109 

110 

113 

115 

114 

110 

Pennsylvania   . 

99 

100 

100 

100 

100 

100 

100 

100 

99 

Maryland     .     . 

102 

102 

102 

102 

102 

102 

102 

102 

102 

Virginia  .     .     . 

50 

42 

35 

35 

44 

39 

36 

36 

38 

North  Carolina 

21 

29 

21 

30 

19 

24 

24 

33 

25 

South  Carolina 

34 

27 

15 

28 

31 

32 

31 

11 

26 

Georgia   .     .     . 

73 

87 

68 

81 

98 

101 

104 

107 

90 

Alabama      .     . 

90 

57 

25 

43 

26 

26 

29 

60 

45 

Louisiana    .     . 

t>8 

50 

19 

25 

35 

39 

61 

67 

46 

Texas.     .     .     . 

88 

73 

83 

96 

101 

101 

101 

101 

93 

Arkansas     .     . 

50 

30 

19 

12 

15 

11 

8 

7 

19 

Tennessee    .     . 

65 

79 

69 

38 

44 

42 

35 

33 

53 

Kentucky     .     . 

96 

96 

98 

100 

101 

101 

101 

101 

99 

Oliio    .... 

100 

101 

100 

102 

107 

106 

104 

106 

103 

Indiana  .     .     .    ' 

100 

102 

100 

99 

100 

100 

100 

100 

100 

Illinois     .     .     . 

99 

95 

95 

99 

101 

100 

102 

103 

99 

Michigan     .     . 

98 

97 

94 

102 

105 

104 

104 

107 

101 

Missouri  .     .     . 

94 

90 

90 

96 

101 

103 

104 

105 

98 

California    .     . 

110 

110 

110 

105 

105 

105 

105 

105 

107 

B. 
Table  showing  the  assessed  valuation  of  property  in  the 
Southern  States  in  1860  and  1870.2 

1  Taken  from  R.  P.  Porter's  arti'cle  in  International  Review  for 
November,  1880. 

2  See  Tenth  Census,  vol.  vii.  p.  8. 


276 


APPENDICES. 


Per  cent  of 

I860 

1870 

decrease 

Arkansas  .    .     . 

$180,211,330 

$94,528,843 

47.5 

Virginia     .     .     . 

657,021,336 

505,978,190 

23 

North  Carolina  . 

292,297,602 

130,378,190 

55.4 

South  Carolina  . 

489,319,128 

183,913,337 

62.4 

Georgia      .     .     . 

618,232,387 

227,219,519 

63.2 

Florida  .... 

68,929,685 

32,480,843 

52.9 

Alabama    .     .     . 

432,198,762 

155,582,595 

64 

Mississippi     .     . 

509,472,912 

177,278,890 

65.5 

Louisiana  .     .     . 

435,787,265 

253,371,890 

41.9 

Tennessee .    .     . 

382,495,200 

253,782,161 

33.7 

c. 

Table  showing  the  growth  of  indebtedness  in  the  Southern 
States,  and  the  amount  rejiudiated  and  scaled  down  between 
the  period  when  the  debt  was  greatest  and  June,  I88O.1 


1842 

1852 

1860 

Virginia    .     .     . 

$6,994,307 

$13,573,355 

$31,779,062 

North  Carolina 

None 

997,000 

9,699,000 

South  Carolina 

5,691,234 

3,144,931 

4,046,540 

Georgia     .     . 

1,309,750 

2,801,972 

2,670,750 

Florida      .     . 

4,000,000 

2,800 

4,120,000 

Alabama   .     . 

15,400,060 

8,500,000 

6,700,000 

Mississippi     . 

7,000,000 

7,271,707 

None 

Louisiana .     . 

23,985,000 

11,492,566 

4,561,109 

Arkansas  .     . 

2,676,000 

1,506,562 

3,092,623 

Tennessee .     . 

3,198,166 

3,776,856 

20,898,606 

Amount  of  debt 
repudiated  and 

scaled  down 
between  period 

Highest  point 
reached  by 

when  it  was 
highest  and 

1870 

the  debt 

1880 

June  1880 

,           $47,390,839 

Ja           29,900,045 

0  ^x"^  \   7,665,909 

$47,390,839 

$29,345,238 

$18,045,613    '^  0  \ 

29,900,045 

3,629,511 

26,270.534  ^ 

24,782,906 

7,175,454 

17,607,452  - 

.       0.       >  6,544,500 

20,197,500 

10,334,000 

9,863,500  ^ 

*>•     (.''     1,288,697 

5,512,268 

1,391,357 

4,120,911 

8,478,018 

31,952,000 

11,613,670 

20,338,330  ^ 

1,796,230 

3,226,847 

379,485 

2,847,362  -  . 

25,021,734 

40,416,734 

12,635,810 

27,780,924  ^ 

/  ^                3,459,537 

18.287,233 

5,813,627 

12,473,646          ' 

^                 38,539,802 

41,863,406 

25,685,822 

16,177,584 

1  Taken  from 

R.  P.  Porter' s  article  in  International  Review  for 

November,  1880. 

.•\^ 

-.^^^' 

/^a 

V 


APPENDICES. 


211 


D. 

Table  showing  debts  of   the  New    England,   Middle, 
Southern,  Western,  and  Pacific  States  in  different  years.' 


New  England 
Middle      .     . 
Southern 
AVestern    .     . 
Pacific       .    . 

Total      . 


New  England 
Middle .  .  . 
Southern  .  . 
Western  .  . 
Pacific  .     .     . 


1842 
$7,158,274 
73,348,072 
73,340,017 
59,931,553 


1852 
$6,862,060 
79,510,726 
64,499,727 
42,993,185 
2,159,403 


1860 

$7,398,060 

86,416,045 

174,486,452 

49,395,325 


$213,777,916    $196,025,306    $236,256,304 


Total 


1870 

$50,348,550 
79,834,481 

174,486,452 

44,018,911 

4,178,504 

$352,866,898 


1880 

$49,979,514 
45,672,575 

113,967,243 

36,565,360 

4,547,389 

$250,732,081 


The  following  were  the  issues  of  Louisiana  State  bonds 
declared  "  questioned  and  doubtful"  by  the  act  of  May  19, 
1875.'^ 


lionds  of  the  New  Orleans  and  Nashville  R.R.  .  . 
*'       Mexican  Gulf  R.R 

"  *'  New  Orleans,  Jackson,  and  Great 
Northern  R.R 

"  '*  New  Orleans,  Opelousas,  and  Great 
Western  R.R 

"  *'  Yicksburg,  Shreveport,  and  Texas 
R.R 

"  "  Baton  Rouge,  Grosse  Tete,  and  Ope- 
lousas R.R 

"     for  relief  of  the  treasury 

"     for  the  Free  School  Fund 


$18,000 
3,000 

270,000 

79,000 

50,000 

30,000 

65,500 

529,000 

Carried  forward,  $1,044,500 

1  Taken  from  R.  P.  Porter's  article  in  International  Review  for 
November,  1880. 

2  See  page  113. 


278  APPENDICES. 

Brought  forward,  $1,044,500 

Bonds  issued  under  act.of  Dec.  22,  1865     ....  1,000,000 

"       "    *'  March  26,  1867  ....  4,000,000 

"         *'          "       "    "  Feb.  24,  1870      ....  2,900,000 

"  "      to    the    New    Orleans,   Mobile,    and 

Texas  R.K 2.500,000 

"          "      to  the  North  Louisiana  and  Texas  K.R.  1,122,000 
*'          "      to  the  Miss,  and  Mexican  Gulf  Ship 

Canal 480,000 

"      for  relief  of  P.  J.  Kennedy 134,000 

'*      "    redemption  of  certificates 250,000 

*'      issued  to  Boeff  and  Crocodile  Navigation 

Company 80,000 

Total $13,570,000 


APPENDIX  III. 

EXTKACTS  FROM  THE  CHARTER  OF  THE  MISSISSIPPI  UNION 
BANK   AND   THE   ACT   SUPPLEMENTARY   THERETO. 

An  Act  to  incorporate  the  subscribers  to   the  Mississippi 

Union  Bank. 

Section  I.  Be  it  enacted  by  the  legislature  of  the  State  of 
Mississippi,  That  an  institution  shall  be  established  under 
the  title  of  "The  Mississippi  Union  Bank,"  with  a  capital 
of  fifteen  million  five  hundred  thousand  dollars,  which  said 
capital  shall  be  raised  by  means  of  a  loan  to  be  obtained  by 
the  directors  of  the  institution. 

Sec.  2.  Be  it  further  enacted.  That  books  of  subscription 
for  the  said  fifteen. million  five  hundred  thousand  dollars, 
divided  into  shares  of  one  hundred  dollars  each,  and  in- 
tended to  secure  the  loan  of  said  fifteen  million  five  hundred 
thousand  dollars,  shall  be  opened  after  twenty  days'  notice 
given  in  all  the  newspapers  published  in  this  State,  and  in 
all  counties  in  which  no  newspaper  shall  be  established, 
notice  shall  be  given  by  advertisement  })()sted  up  in  three 
of  the  most  public  places  in  each  of  the  said  counties  im- 


APPENDICES.  279 

mediately  after  the  promulgation  of  this  act,  under  the 
inspection  of  ten  managers  to  be  chosen  by  joint  ballot  by 
the  legislature.  .  .  . 

Sec.  4.  Be  it  further  enacted,  That  the  owners  of  real 
estate  situated  in  the  State  of  Mississippi,  and  who  are 
citizens  thereof,  shall  be  the  only  persons  entitled  to  sub- 
scribe ;  and  shares  so  subscribed  shall  be  transferable  only 
to  such  owners  until  after  five  years,  when  they  may  be 
transferred  to  any  owner  of  real  estate  in  this  State, 
whether  citizens  or  not:  Provided,  however,  to  secure  the 
capital  or  interest  of  said  bank,  mortgages  shall  be  given  on 
property  of  a  sufficient  character  and  of  an  imperishable 
nature. 

Sec.  5.  Be  it  further  enacted.  That  in  order  to  facilitate 
the  said  Union  Bank  for  the  said  loan  of  fifteen  million  five 
hundred  thousand  dollars,  the  faith  of  this  State  be,  and  is 
hereby  pledged,  both  for  the  security  of  the  capital  and 
interest,  and  that  seven  thousand  five  hundred  bonds  of 
two  thousand  dollars  each  .  .  .  shall  be  signed  by  the 
Governor  of  the  State,  to  the  order  of  the  Mississippi  Union 
Bank,  countersigned  by  the  State  Treasurer,  and  under  seal 
of  the  State ;  said  bonds  to  be  in  the  following  words  ;  viz., 

$2,000. 

Know  all  men  by  these  presents,  that  the  State  of  Mis- 
sissippi acknowledges  to  be  indebted  to  the  Mississippi  Union 
Bank  in  the  sum  of  two  thousand  dollars,  which  sum  the 
said  State  of  Mississippi  promises  to  pay  in  current  money 
of  the  United  States,  to  the  order  of  the  president,  directors, 
and  company,  in  the  year  with  interest  at  the 

rate  of  five  per  cent  per  annum,  payable  half  yearly  at 
the  place  named  in  the  indorsement  hereto ;  viz.,  — 

On  the  of  every  year  until  the  payment  of  the 

said  principal  sum :  in  testimony  whereof  the  Governor  of 
the  State  of  Mississippi  has  signed,  and  the  treasurer  of  the 
State  has  countersigned,  these  presents,  and  caused  the  seal 


280  APPENDICES. 

of  the  State  to  be  affixed  thereto,  at  Jackson,  this  in 

the  year  of  our  Lord. 

Governor. 
Treasurer. 

Sec.  8.  Be  it  further  enacted,  That  to  secure  the  pay- 
ment of  the  capital  and  interest  of  said  bonds,  the  sub- 
scribers shall  be  bound  to  give  mortgage  to  the  satisfaction 
of  the  directors  on  property  to  be  in  all  cases  equal  to  the 
amount  of  their  respective  stock,  which  mortgage  may  bear 
on  cultivated  land,  plantations,  and  slaves ;  on  town  lots 
with  houses  thereon ;  on  other  buildings  yielding  a  rent ; 
on  lands  not  under  cultivation  but  susceptible  of  being  culti- 
vated ;  and  on  vacant  lots  capable  of  being  improved,  with 
this  provision,  that  not  more  than  one-fifth  of  the  stock  of 
each  stockholder  may  be  secured  by  mortgage  on  unimproved 
lands  not  included  in  any  plantation,  and  on  vacant  lots  in 
town  :  no  mortgage  on  slaves  alone  shall  be  received ;  and 
that  when  a  mortgage  shall  be  offered  on  lands  and  slaves, 
the  value  of  the  lands  shall  be  equal  to  three-fourths  of  the 
stock  for  which  the  mortfrage  shall  be  given.  .  .  . 

Sec.  12.  Be  it  further  enacted,  That  after  the  closing  of 
the  books,  and  when  it  shall  appear  that  at  least  five  hun- 
dred thousand  dollars  shall  have  been  subscribed  and  paid 
in  on  the  original  stock  of  the  capital  of  said  bank,  the  said 
institution  shall  go  into  immediate  operation  under  the  pro- 
vision hereinafter  mentioned. 

{Approved  Feb.  5,  1838.) 

An  Act  supplementary  to  an  act  to  incorporate  the  subscri- 
bers to  the  Mississippi  Union  Bank. 
Section  1 .  Be  it  enacted  by  the  legislature  of  the  State  of 
Mississippi,  That  as  soon  as  the  books  of  subscription  for 
stock  in  the  said  Mississippi  Union  Bank  are  opened,  the 
Governor  of  this  State  is  hereby  authorized  and  required  to 
subscribe  for,  in  behalf  of  this  State,  fifty  thousand  shares 
of  the  stock  of  the  original  capital  of  the  said  bank ;  the 


APPENDICES.  281 

same  to  be  paid  for  out  of  the  proceeds  of  the  State  bonds 
to  be  executed  to  the  said  bank  as  already  provided  for  in 
the  said  charter ;  and  that  the  dividends  and  profits  which 
may  accrue  and  be  declared  by  the  bank  on  the  said  stock 
subscribed  for  in  behalf  of  the  State,  shall  be  held  by  the 
said  bank  subject  to  the  control  of  the  State  legislature  for 
the  purposes  of  internal  improvement. 

Sec.  9.  Be  it  further  e?iactcd.  That  the  president  and 
directors  of  the  said  ^Mississippi  Union  Bank,  or  the  mana- 
gers thereof,  shall  have  ample  power  to  appoint  three  com- 
missioners to  negotiate  and  sell  the  State  bonds,  provided 
for  in  the  fifth  section  of  the  act  incorporating  the  subscii- 
bers  to  the  Mississippi  Union  Bank,  in  any  market  within  the 
United  States,  or  in  any  foreign  market,  under  such  rules 
and  regulations  as  may  be  adopted  by  said  president  and 
directors  or  managers,  not  inconsistent  with  the  provisions 
of  the  charter  of  said  bank :  Provided,  said  bonds  shall  not 
be  sold  under  their  par  value,  and  that  said  commissioners 
shall  not  accept  of  any  commission  or  agency  from  any  other 
banking  or  railroad  company  whatsoever  for  the  disposal 
of  any  bonds  for  the  raising  of  money,  or  act  as  agents 
for  the  procuring  of  loans  upon  the  pledge  of  real  estate  for 
the  benefit  of  any  other  corporation. 

(Approved  Feb.  15,  183S.) 


APPENDIX  IV. 

extracts  from  the  mcculloch,  riddleberger,  and 
debt-settlement  acts  of  virginia. 

Acts  of  the  Assembly  of  Virginia,  1878-79,  Chap.  24. — 

An  Act  to  provide  apian  of  settlement  of  the  public  debt. 

Whereas  it  is  believed  by  the  General  Assembly  that  the 

rate  of  interest  heretofore  agreed  to  be  paid  by  the  State  on 

the  public  debt  is  greater  than  can  be  borne  without  destroy- 


282  APPENDICES. 

ing  the  industrial  interests  of  the  State ;  and  whereas  the 
council  of  foreign  bondholders  of  London,  England,  and 
the  funding  association  of  the  United  States  of  America, 
limited,  have,  in  view  of  this  belief,  expressed  their  willing- 
ness to  jointly  endeavor  to  obtain  the  consent  of  the  credi- 
tors to  an  abatement  in  the  rate  of  interest ;  and  whereas  it 
is  highly  expedient,  in  the  best  interests  of  the  State,  to 
secure  an  amicable  settlement  with  the  creditors  by  which 
the  credit  of  the  State  may  be  restored  and  enhanced,  and 
the  aggregate  amount  of  interest  payable  by  the  State 
reduced  within  limits  which  will  not  be  too  onerous  to  the 
State;  therefore, 

1.  Be  it  enacted  by  the  General  Assembly  of  Virginia, 
That  to  provide  for  the  funding  the  debt  of  the  State,  the 
Governor  is  hereby  authorized  to  create  bonds  of  the  State, 
registered  and  coupon,  dated  the  first  day  of  January,  eigh- 
teen hundred  and  seventy-nine,  the  principal  j^ayable  forty 
years  thereafter,  bearing  interest  at  the  rate  of  three  per  cen- 
tum per  annum  for  ten  years,  and  at  the  rate  of  four  per 
centum  per  annum  for  twenty  years,  and  at  tlie  rate  of  five 
per  centum  per  annum  for  ten  years,  payable  in  the  cities  of 
Richmond,  New  York,  or  London,  as  hereinafter  provided, 
on  the  first  days  of  July  and  January  of  each  year,  until  the 
principal  is  redeemed.  .  .  .  The  coupons  of  said  bonds 
shall  be  receivable  at  and  after  maturity  for  all  taxes,  debts, 
dues,  and  demands  due  he  tState,  and  this  shall  be  exjDressed 
on  their  face.  The  holder  of  any  registered  bond  shall  be 
entitled  to  receive  from  the  treasurer  of  the  State  a  certifi- 
cate for  any  interest  thereon  due  and  unpaid,  and  such  cer- 
tificate shall  be  receivable  for  all  taxes,  dues,  and  demands 
due  the  State,  and  this  shall  be  expressed  on  the  face  of  the 
registered  bond  and  on  the  face  of  such  certificate.  All 
obligations  created  under  this  act  shall  be  forever  exempt 
from  all  taxation,  direct  or  indirect,  by  the  State,  or  by  any 
county  or  corporation  therein,  and  this  shall  be  expressed 
on  the  face  of  the  bonds.  .  .  .  The  bonds  hereby  authorized 


APPENDICES.  283 

shall  be  issued  only  in  exchange  for  the  outstanding  debt  of 
the  State,  as  hereinafter  provided. 

2.  For  purposes  of  designation,  the  outstanding  indebted- 
ness of  the  State,  as  follows,  to  wit : 

Class  I.,  which  shall  be  taken  to  include  all  tax-receivable 
coupon  bonds,  and  all  registered  bonds  and  fractional  cer- 
tificates which  are  convertible  under  the  act  approved 
March  thirtieth,  eighteen  hundred  and  seventy-one,  into 
such  tax-receivable  coupon  bonds. 

Class  II.,  which  shall  be  taken  to  include  all  bonds 
funded  under  the  act  approved  March  thirtieth,  eighteen 
hundred  and  seventy-one,  as  amended  by  the  act  approved 
]\Iarcli  seventh,  eighteen  hundred  and  seventy-two ;  and 
also  two-thirds  of  the  face  value,  with  two-thirds  of  the 
unpaid  accrued  interest  up  to  the  first  of  July,  eighteen 
hundred,  and  seventy-one,  on  all  unfunded  bonds,  including 
sterling  bonds. 

3.  The  outstanding  indebtedness  of  the  State  shall  be 
funded  in  the  new  bonds  to  be  issued  under  this  act  as 
follows :  Bonds  shall  be  presented  for  exchange  with  all 
coupons  attached  maturing  after  the  date  of  presentation, 
and  shall  be  exchanged  at  the  face  value  of  said  bonds, 
dollar  for  dollar,  for  the  new  bonds,  Avith  all  coupons  at- 
tached maturing  after  the  date  of  said  presentation :  pro- 
vided that  the  proportion  of  Class  II.  refunded  shall  never 
exceed  in  amount  one-third  of  the  total  amount  refunded, 
until  eighteen  million  dollars  of  Class  I.  have  been  retired. 
The  new  bonds  to  be  issued  may  be  coupon  or  registered 
at  the  option  of  the  holder,  and  at  the  like  option  coupon 
bonds  may  at  any  time  be  converted  into  registered  bonds. 

4.  All  due  and  unpaid  interest  may  be  funded  under  the 
provisions  of  this  act  at  the  rate  of  fifty  cents  on  the  dollar, 
and  shall  be  fundable  at  that  rate  under  the  third  section  of 
this  act,  and  taken,  under  the  provisions  of  said  section,  in 
lieu  of  bonds  of  Class  II. 

5.  If  on  or  before  the  first  day  of  May,  eighteen  hundred 


284  APPENDICES. 

and  seventy-nine,  the  council  of  foreign  bondholders  and 
the  funding  association  of  the  United  States  of  America 
aforesaid  shall  file  with  the  Governor  their  assent  to  and 
acceptance  of  the  terms  of  this  act,  the  same  shall  be  taken 
to  be  a  contract  between  the  State  and  the  said  corporation, 
and  the  Governor  shall  forthwith  provide  for  the  prepara- 
tion of  the  bonds  provided  for  by  this  act.  .  .  . 

8.  The  General  Assembly  will,  by  necessary  and  appro- 
priate legislation,  provide  for  the  prompt  payment  of  the 
interest  on  the  bonds  issued  under  this  act. 

9.  In  the  year  eighteen  hundred  and  eighty-five,  and 
annually  thereafter  until  all  the  bonds  issued  under  and  by 
authority  of  this  act  are  paid,  there  shall  be  levied  and 
collected  the  same  as  and  together  with  other  taxes,  a  tax 
of  two  cents  on  the  one  hundred  dollars  of  the  assessed 
valuation  of  all  the  property,  personal,  real,  and  mixed,  in 
the  State,  which  shall  be  paid  into  the  treasury  of  the  State  to 
the  credit  of  the  sinking  fund.  The  treasurer,  the  auditor 
of  public  accounts,  and  second  auditor,  are  hereby  appointed 
Commissioners  of  the  Sinking  Fund,  and  shall  have  (a 
majority  acting)  the  control  and  management  thereof,  and 
shall  annually,  or  oftener,  apply  whatever  sum  or  sums 
may  be  to  the  credit  of  the  sinking  fund  to  the  purchase 
and  redemption  of  funds  issued  under  this  act.  .  .  . 

12.  Whenever  there  shall  not  be  a  sufficient  amount  of 
monej'-  in  the  treasury  of  the  State  to  meet  the  accruing  in- 
terest on  the  said  bonds  promptly,  the  auditor  is  hereby 
authorized  and  directed,  by  and  with  the  advice  of  the 
Governor  of  Virginia,  to  raise  by  temporary  loan,  to  be 
returned  out  of  the  accruing  revenues  of  the  State,  a  sum 
sufficient  to  enable  him  to  meet  promptly  the  said  interest  as 
it  accrues.  And  in  case  the  auditor  shall  not  be  able  to  raise 
a  sufficient  sum  for  the  said  purpose  by  loan,  he  is  hereby 
authorized  and  directed  to  issue  non-interest-bearing  certifi- 
cates of  indebtedness  of  tliis  State,  to  be  signed  by  himself 
and  countersigned  by  the  treasurer,  and  properly  registered 


APPENDICES.  285 

in  the  offices  of  the  auditor  and  treasurer,  for  the  sum  of 
one  dollar  and  multiples  thereof,  the  same  to  be  printed 
from  plates,  which  shall  be  the  property  of  the  State,  and 
to  sell  the  same  at  not  less  than  a  minimum  price  to  be 
fixed  by  the  Commissioners  of  the  Sinking  Fund,  which  shall 
not  be  less  than  seventy-five  cents  on  the  dollar.  The  said 
certificates  shall  be  receivable  for  all  taxes,  debts,  dues, 
and  demands  due  the  State,  and  this  shall  be  expressed  on 
their  face.  .  .  . 

13.  The  act  approved  March  fourteenth,  eighteen  hun- 
dred and  seventy-eight,  and  all  acts  inconsistent  with  the 
provisions  of  this  act,  are  hereby  appealed. 

(Approved  March  28,  1879.) 

Acts  of  the  Assembly  of  Virginia,  1881-82,  Chap.  84. — 
An  Act  to  ascertain  and  declare  Virginia's  equitable  share 
of  the  debt  created  before,  and  actually  existing  at  the  time, 
of  the  jyartition  of  her  territory  and  resources,  and  to  pro- 
vide for  the  issuance  of  bonds  covering  the  same,  and  the 
regular  and  prompt  payment  of  interest  thereon. 
Whereas  to  the  end  which  this  act  comprehends,  a  full 
statement  of  the  debt  is  essential,  and  whereas  the  follow- 
ing has  been  carefully  made  up  from  tlie  records  of  the 
second  auditor's  office  of  the  State,  it  is  confidently  submitted 
as  presenting  a  true  state  of  the  account  between  the  State 
and  her  creditors  —  the  account  is  as  follows :  [Here  follows 
an  itemized  statement  of  the  debt.] 

And  whereas  by  this  account  it  appears  that  Virginia 
owes  her  creditors,  as  of  the  first  July,  eighteen  hundred 
and  eighty-two,  including  the  bonds  held  by  the  Literary 
Fund,  and  arrears  of  interest  thereon  cast  to  such  date, 
twenty-one  million,  thirty-five  thousand,  three  hundred  and 
seventy-seven  dollars  and  fifteen  cents ;  and  that  she  may 
cause  to  be  issued  her  own  bonds  for  the  same,  and  provide 
for  the  certain  payment  of  interest  tliereon ;  that  is  for  her 
equitable  share  of  the  bonds  known  as  consols,  and  here 


286  APPENDICES. 

designated  as  class  A,  and  whereof  there  are  outstanding 
fourteen  million,  three  hundred  and  sixty-nine  thousand, 
nine  hundred  and  seventy-four  dollars  and  eighty-one  cents ; 
and  for  her  equitable  share  of  the  bonds  known  as  ten-for- 
ties, and  here  designated  as  class  B,  and  whereof  there  are 
outstanding  eight  million,  five  hundred  and  seventeen  thou- 
sand, six  hundred  dollars ;  and  for  her  equitable  share  of 
the  bonds  known  as  peeler,  and  here  designated  as  class  C, 
and  whereof  there  are  outstanding  two  million,  three  hun- 
dred and  ninety-four  thousand,  three  hundred  and  five  dol- 
lars and  twelve  cents ;  and  for  her  equitable  share  of  the 
interest  thereon,  designated  as  class  D,  and  whereof  there 
is  now  in  arrears  nine  hundred  and  twenty-eight  thousand, 
eight  hundred  and  eighty-seven  dollars  and  forty-five  cents, 
and  counted  to  the  first  of  July,  eighteen  hundred  and  eighty- 
two,  makes  the  amount  of  such  interest,  then  to  be  in  arrears, 
one  million,  seventy-two  thousand,  five  hundred  and  forty- 
five  dollars  and  seventy-five  cents;  and  for  her  equitable 
share  of  the  bonds  known  as  unfunded  bonds  —  dollar  and 
sterling  —  here  designated  as  class  E,  and  whereof  there 
are  now  outstanding,  computed  at  two-thirds,  three  million, 
seven  hundred  and  seventy-three  thousand,  four  hundred 
and  ninety- three  dollars  and  sixty-eight  cents ;  and  for  her 
equitable  share  of  the  interest  thereon  now  in  arrears,  two 
million,  six  hundred  and  thirty-six  thousand,  four  hundred 
and  forty-four  dollars  and  thirty-four  cents,  and  counted  to 
the  first  of  July,  eighteen  hundred  and  eighty-two,  making 
as  of  that  date  (two  hundred  and  twentj'^-six  thousand,  four 
hundred  and  nine  dollars  and  sixty -two  cents  more),  the  sum 
of  two  million,  eight  hundred  and  sixty-two  thousand,  eiglit 
hundred  and  fifty-three  dollars  and  ninety-six  cents,  and 
here  designated  as  class  F ;  and  for  her  equitable  share  of 
the  bonds  held  by  the  Commissioners  of  the  Literary  Fund, 
whereof  there  are  one  miUion,  four  hundred  and  twenty-eight 
thousand,  two  Inmdred  and  forty-five  dollars  and  twenty-five 
cents ;  and  whereas  the  rate  of  interest  which  any  people  can 


APPENDICES.  287 

safely  undertake  to  pay  must  be  determined  by  the  measure 
of  their  productive  resources  ;  and  whereas  these  have  long 
been  burdened  by  a  rate  of  taxation  which  is  conceded  to  be 
as  high  as  can  be  endured ;  and  whereas  the  means  of  prompt 
and  certain  payment  should  be  apparent  to  the  creditor, 
while  the  people  have  assurance  for  the  support  of  govern- 
ment and  the  maintenance  of  their  schools,  as  required  by 
the  constitution  ;  and  whereas  the  net  revenues  of  the  State, 
remaining  and  so  derived,  after  providing  for  tlie  proper 
and  gradual  liquidation  of  the  balance  of  the  moneys  here- 
tofore diverted  from  the  public  free  school  fund,  after  liqui- 
dating gradually  the  arrearages  to  the  Literary  Fund,  and 
leaving  some  small  margin  for  the  immediate  and  subse- 
quent exigencies  which  are,  and  are  likely  to  be  demanded 
by  the  public  welfare  —  notably  in  respect  to  tlie  humane 
institutions,  now  inadequate  to  the  proper  accommodation  of 
that  unfortunate  class  of  every  population  —  do  not  warrant 
the  assumption  of  a  larger  rate  of  interest  than  three  per 
centum  upon  the  full  amount  of  Virginia's  equitable  share 
of  the  debt  of  the  old  and  entire  State,  as  the  same  is  ascer- 
tained and  now  formally  declared  by  the  foregoing  account ; 
therefore, 

1.  Be  it  enacted  by  the  General  Assembly  of  Vh^ginia, 
That  the  Board  of  Commissioners  of  the  Sinking  Fund  of  the 
State  be,  and  they  are  hereby  empowered  and  directed  to  cre- 
ate bonds,  registered  and  coupon,  to  such  extent  as  may  be 
necessary  to  comply  with  the  provisions  of  this  act. 

2.  The  said  bonds  shall  be  dated  July  first,  eighteen  hun- 
dred and  eighty- two,  and  be  payable  at  the  office  of  the 
ti-easurer  of  the  State  on  the  first  day  of  July,  nineteen 
hundred  and  thirty-two :  provided  that  the  State  may,  at 
any  time  and  from  time  to  time,  after  July  first,  nineteen 
hundred,  redeem  any  part  of  the  same,  principal  and  inter- 
est, at  par.  In  case  of  such  redemption  before  maturity, 
the  bonds  to  be  paid  shall  be  determined  by  lot  by  said 
Board  of  Commissioners,  and  notice  of  the  bonds  so  selected 


288  APPENDICES. 

to  be  paid  shall  be  given  in  a  newspaper  published  in  Rich- 
mond, New  York,  and  London,  England,  when  interest  from 
and  after  ninety  days  from  the  date  of  said  publication  in 
London  shall  cease  upon  the  bonds  so  designated  to  be  paid. 

5.  The  said  Board  of  Commissioners  are  authorized  to 
issue  such  bonds,  in  denominations  of  five  hundred  and  one 
thousand  dollars,  as  may  be  necessary  to  carry  out  the  pro- 
visions of  this  act,  each  denomination  to  be  of  different 
tint :  provided  that  registered  bonds  may  be  issued  of  any 
denomination,  multiple  of  one  hundred;  all  registered 
bonds  to  be  of  the  same  tint ;  and  they  are  authorized  and 
directed  to  issue  such  bonds,  registered  or  coupon,  in  ex- 
chano^e  for  the  outstanding  evidences  of  debt  hereinbefore 
enumerated,  including  the  bonds  held  by  the  Literary  Fund, 
as  follows,  that  is  to  say : 

(a)  For  her  equitable  share  of  class  A,  at  the  rate  of 
fifty-three  per  centum ;  that  is  to  say,  fifty-three  dollars  of 
the  bonds  authorized  under  this  act  (principal  and  accrued 
interest  at  par  from  the  preceding  period  of  maturity  to 
the  date  of  exchange)  are  to  be  given  for  every  one  hun- 
dred dollars,  face,  principal,  and  accrued  interest  from  the 
preceding  semi-annual  period  of  maturity  to  the  date  of 
exchange  of  such  evidences  of  debt,  and  for  any  interest 
which  may  be  past  due  and  unpaid  upon  the  same,  funded 
bonds  issued  under  this  act  may  be  given,  dollar  for  dollar. 

(6)  For  her  equitable  share  of  class  B,  at  the  rate  of 
sixty  per  centum,  reckoning  and  accounting  for  any  inter- 
est, as  provided  in  the  case  of  class  A. 

(c)  For  her  equitable  share  of  class  C,  at  the  rate  of 
sixty-nine  per  centum,  reckoning  any  current  interest  at 
the  date  of  exchange  as  in  the  cases  of  classes  A  and  B,  and 
accounting  for  the  same  as  provided  in  class  D. 

{(1)  For  her  equitable  share  of  class  D,  at  the  rate  of 
eighty  per  centum. 

(e)  For  her  equitable  share  of  class  E,  at  the  rate  of 
sixty-nine  per  centum,  reckoning  any  current  interest  at 


APPENDICES,  289 

the  date  of  exchange  as  in  the  cases  of  classes  A,  B,  and  C, 
and  accounting  for  the  same  as  provided  in  class  F. 

(/)  For  her  equitable  share  of  class  F,  at  the  rate  of 
sixty-three  per  centum. 

(y)  For  her  equitable  share  of  the  bonds  of  the  Literary- 
Fund,  as  in  the  case  of  class  C  ;  her  equitable  share  of  the 
arrearages  of  interest  —  three  hundred  and  seventy-nine 
thousand,  two  hundred  and  seventy  dollars  —  to  be  paid  in 
money. 

6.  For  all  balances  of  such  indebtedness,  constituting 
West  Virginia's  share  of  the  old  debt,  principal  and  inter- 
est, in  the  settlement  of  Virginia's  equitable  share  as  afore- 
said, the  said  Board  of  Sinking  Fund  Commissioners  shall 
issue  a  certificate  as  follows : 


No. 


The  commonwealth  of  Virginia  has  this  day  discharged 
her  equitable  share  of  the  (registered  or  coupon,  as  the  ease 

may  be)  bond  for dollars,  held  by ,  dated  the 

day  of ,  and  numbered ,  leaving  a  bal- 
ance of dollars,  with  interest  from ,  to  be  ac- 
counted for  by  the  State  of  West  Virginia,  without  recourse 
upon  this  commonwealth. 

Done  at  the  capital  of  the  State  of  Virginia,  this 

day  of ,  eighteen . 


-,  Second  Auditor. 
-,  Treasurer. 


11.  In  the  year  eighteen  hundred  and  ninety,  and  annu- 
ally thereafter  until  all  the  bonds  issued  under  and  by  au- 
thority of  this  act  are  paid,  there  shall  be  set  apart  of  the 
revenue  collected  from  the  property  of  the  State  eacli  year, 
two  and  one-quarter  per  centum  upon  the  bonds  at  the  time 
outstanding,  which  shall  be  paid  into  the  treasury  to  the 
credit  of  the  Sinking  Fund,  and  the  Commissioners  of  the 
said  Sinking  Fund  shall,  annually  or  oftener,  apply  the  same 
to  the  redemption  or  purchase  (at  the  rate  not  above  par) 


290  APPENDICES. 

of  the  bonds  issued  under  this  act,  and  the  bonds  so  re- 
deemed shall  be  cancelled  by  the  said  Board,  and  the  same 
registered  by  the  second  auditor  in  a  book  to  be  kept  for 
the  purpose,  giving  the  number,  the  date  of  issue,  the 
character,  the  amount,  and  the  owner  at  the  time  of  pur- 
chase of  the  bonds  so  redeemed  and  cancelled ;  and  in  case 
no  such  purchase  of  bonds  can  be  made,  then  the  amount 
which  can  be  redeemed  shall  be  called  in  by  lot,  as  pro- 
vided in  section  two  of  this  act. 

15.  That  from  and  after  the  passage  of  this  act,  no  bonds, 
certificates,  or  other  evidences  of  indebtedness,  shall  be  is- 
sued for  any  portion  of  the  debt  of  this  State,  nor  shall  any 
interest  be  paid  upon  any  part  or  portion  of  said  debt, 
except  as  hereinbefore  provided. 

(Approved  Feb.  14,  1882.) 

SENATE  BILL  No.  368. 

An  Act  to  provide  for  the  settlement  of  the  public  debt  of  Vi?^- 
ginia  not  funded  under  the  provisions  of  an  act  entitled 
"  An  Act  to  ascertain  and  declare  Virginia'' s  equitable  share 
of  the  debt  created  before  and  actually  existing  at  the  time 
of  the  partition  of  her  territory  and  resources,  and  to  pro- 
vide for  the  issuance  of  bonds  covering  the  same,  and  the 
regular  and  prompt  j)ciyment  of  interest  thereon,'*''  approved 
February  U,  1882. 

Whereas,  By  a  joint  resolution  of  the  General  Assembly  of 
the  State  of  Virginia,  adopted  on  the  third  day  of  March, 
eighteen  hundred  and  ninety,  a  commission  was  appointed 
on  the  part  of  Virginia  to  receive  propositions  for  funding 
the  debt  of  the  State  not  funded  under  the  act  known  as  the 
"  Riddleberger  Bill,"  approved  February  fourteenth,  eigh- 
teen hundred  and  eighty-two,  from  a  properly  constituted 
representative  of  her  creditors ;  and 

Whereas,  Said  Virginia  Debt  Commission  has  submitted 
a  report  to  the  General  Assembly,  wherein  it  appears  that 


APPENDICES.  291 

under  a  certain  agreement,  dated  JNIay  twelfth,  eighteen 
hundred  and  ninety,  lodged  with  the  Central  Trust  Com- 
pany of  New  York,  Frederick  P.  Olcott,  William  L.  Bull, 
Henry  Budge,  Charles  D.  Dickey,  Jr.,  Hugh  R.  Garden, 
and  John  Gill,  constituting  a  committee  for  certain  of  the 
creditors  of  Virginia,  called  the  "  Bondholders'  Committee," 
have  proposed  to  said  commission  to  surrender  to  the  State 
in  bulk  not  less  than  twentj^-three  millions  of  dollars  of  the 
public  debt,  unfunded  under  said  act  approved  February 
fourteenth,  eighteen  hundred  and  eighty-two,  in  exchange 
for  an  issue  of  new  bonds,  as  hereinafter  specified,  the  same 
to  be  apportioned  between  the  several  classes  of  creditors 
by  a  tribunal  which  the  said  creditors  have  themselves  ap- 
pointed; and  that,  in  pursuance  of  said  proposal,  an  agree- 
ment has  been  entered  into  unanimously  between  the  said 
commission  and  the  said  bondholders'  committee,  subject  to 
approval  b}^  the  General  Assembly,  whereby  in  exchange 
for  the  said  unsettled  obligations  of  the  State  held  by  the 
public,  which  were  issued  prior  to  February  fourteenth, 
eighteen  hundred  and  eighty-two  (exclusive  of  evidences 
of  debt  held  by  the  public  institutions  of  the  Commonwealth 
pursuant  to  law  and  b}^  the  United  States),  together  with 
tlie  interest  thereon  to  July  first,  eighteen  hundred  and 
ninety-one,  inclusive,  aggregating  about  twenty-eight  mil- 
lions of  dollars,  there  shall  be  issued  nineteen  millions  of 
dollars  of  new  bonds,  dated  July  first,  eighteen  hundred 
and  ninety-one,  and  maturing  one  hundred  years  from  said 
date,  with  interest  thereon  at  the  rate  of  two  per  centum 
per  annum  for  ten  years  from  said  first  day  of  July,  eigh- 
teen hundred  and  ninety-one,  and  three  per  centum  per 
annum  for  ninety  years  thereafter  to  the  date  of  maturity, 
said  interest  to  be  payable  semi-annually ;  of  which  aggre- 
gate debt  of  about  twenty-eight  millions  of  dollars  the  said 
bondholders'  committee  represent  that  they  now  hold  and 
agree  to  surrender  not  less  than  twenty-three  millions  of 
dollars;  and 


292  APPENDICES. 

Whereas,  Said  report  and  agi*eement  contemplate  the 
surrender  of  the  obligations  held  by  the  bondholders'  com- 
mittee as  an  entirety,  and  do  not  contemplate  an  apportion- 
ment by  the  General  Assembly  between  the  various  classes 
of  creditors  so  represented  by  said  bondholders'  committee, 
the  same  having  been  committed  to  a  distributing  tribunal, 
as  hereinbefore  recited ;  and 

Whereas,  it  is  the  desire  and  intention  of  the  General 
Assembly  that  a  settlement  of  all  the  other  outstanding 
obligations  of  the  State  (except  those  issued  under  the  act 
of  February  fourteenth,  eighteen  hundred  and  eighty-two, 
the  evidences  of  debt  held  by  the  public  institutions  of  the 
State  in  pursuance  of  law  and  by  the  United  States)  as 
well  as  those  controlled  by  the  bondholders'  committee,  as 
aforesaid,  shall  be  made  under  the  provisions  of  this  act ; 
therefore  — 

1,  Be  it  enacted  by  the  General  Assembly  of  Virginia, 
That  the  commissioners  of  the  sinking  fund,  a  majority  of 
whom  may  act,  be  and  they  are  hereby  empowered  and 
directed  to  create  "listable"  engraved  bonds,  registered 
and  coupon,  to  such  an  extent  as  may  be  necessary  to  issue 
nineteen  million  of  dollars  of  bonds  in  lieu  of  the  twenty- 
eight  million  dollars  of  outstanding  obligations,  not  funded 
under  the  act  approved  February  fourteenth,  eighteen  hun- 
dred and  eighty-two,  hereinbefore  recited. 

2.  The  said  bonds  shall  be  dated  July  first,  eighteen 
hundred  and  ninety-one,  and  be  payable  at  the  office  of  the 
treasurer  of  the  State,  or  at  such  agency  in  the  city  of  New 
York  as  may  be  designated  by  the  State,  on  the  first  day  of 
July,  nineteen  hundred  and  ninety-one,  and  shall  bear 
interest  from  date,  payable  semi-annually  on  the  first  days 
of  January  and  July  in  each  year,  at  the  rate  of  two  per 
centum  per  annum  for  the  first  ten  years,  and  three  per 
centum  per  annum  for  the  remaining  ninety  years  ;  the  said 
interest  may  be  payable  in  Richmond,  New  York,  and  Lon- 
don, or  at  either  place,  as  may  be  designated  by  the  State ; 


APPENDICES-  293 

provided,  that  the  State  may  at  any  time  and  from  time  to 
time  after  July  first,  nineteen  hundred  and  six,  redeem  any 
part  of  the  same  at  par  of  the  principal  with  accrued  in- 
terest. In  case  of  such  redemption  before  maturity,  the 
bonds  to  be  paid  shall  be  determined  by  lot  by  said  Com- 
missioners of  the  Sinking  Fund,  and  notice  of  the  bonds  so 
selected  to  be  paid  shall  be  given  by  publication  beginning 
at  least  ninety  days  prior  to  an  interest-due  date,  in  a  news- 
paper publislied  in  Richmond,  Virginia,  one  in  New  York 
City,  and  one  in  London,  England;  and  the  interest  from 
and  after  the  next  succeeding  interest-due  date  shall  cease 
upon  the  bonds  so  designated  to  be  paid :  provided,  that  no 
registered  bonds  shall  be  so  redeemed  while  there  are  any 
coupon  bonds  outstanding.  .  .  . 

5.  Said  Commissioners  of  the  Sinking  Fund  are  authorized 
to  issue  coupon  bonds  in  denominations  of  five  hundred  and 
one  thousand  dollars  each,  as  may  be  necessary  to  carry 
out  the  provisions  of  this  act:  provided  that  registered 
bonds  may  be  issued  of  the  denominations  of  one  hundred 
dollars,  five  hundred  dollars,  one  thousand  dollars,  five 
tliousand  dollars,  ten  thousand  dollars  ;  and  they  are  author- 
ized and  directed  to  issue  said  bonds,  registered  or  coupon, 
in  exchange  for  the  said  outstanding  obligations  up  to  and 
including  July  first,  eighteen  hundred  and  ninety-one  (ex- 
clusive of  evidences  of  debt  held  by  public  institutions  of 
the  Commonwealth  as  aforesaid  and  by  the  United  States) 
as  follows : 

A.  Said  bondholders'  committee  may  at  any  time  on 
or  before  the  thirtieth  day  of  June,  eighteen  hundred  and 
ninety-two,  present  to  said  commissioners  for  verification 
bonds  and  other  evidences  of  debt,  and  coupons  or  other 
evidences  of  interest  thereon,  obligations  of  the  State  of 
Virginia,  held  by  said  committee,  for  exchange  as  afore- 
said ;  and  said  commissioners  shall  determine  whether  the 
obligations  so  jDresented  are  genuine  obligations  of  the  State 
ajid   \yhether  the  coupons  or  other  evidences  of  interest 


294  APPENDICES. 

represent  interest  accrued  on  such  obligations  (exclusive  of 
evidences  of  debt  held  by  public  institutions  of  the  Com- 
monwealth as  aforesaid  and  by  the  United  States) . 

B.  Such  of  the  obligations  so  presented  for  verification 
as  may  be  determined  by  said  commissioners  to  conform  to 
the  requirements  of  paragraph  A  hereof,  shall  be  sealed  in 
convenient  packages  as  the  examination  proceeds.  Each 
of  the  packages  shall  be  numbered,  and  upon  each  package 
shall  be  indorsed  the  amount  and  character  of  the  obliga- 
tions therein  contained.  Such  indorsement  on  each  pack- 
age shall  be  signed  by  said  commissioners  or  a  majority 
thereof,  and  the  package  shall  then  be  delivered  to  said 
committee  or  its  agent.  Said  commissioners  shall  keej)  in 
a  book  to  be  provided  for  the  purpose  a  record  of  the  num- 
bers of  all  such  packages  and  of  the  amount  and  character 
of  the  obligations  contained  in  each.  Such  obligations 
presented  by  said  bondholders'  committee  as  do  not  conform 
to  the  requirements  of  paragraph  A  hereof  shall  be  returned 
to  said  committee;  but  said  commissioners  shall  kec])  a 
record  thereof  in  the  book  aforesaid. 

C.  After  said  bondholders'  committee  shall  have  pre- 
sented to  said  commissioners  for  verification  bonds  and 
other  evidences  of  debt  and  coupons,  or  other  evidences  of 
interest  thereon  accrued  on  or  before  July  first,  eighteen 
hundred  and  ninety-one,  obligations  of  the  State  of  Vir-, 
ginia,  all  conforming  to  the  requirements  of  i^aragrajjli  A 
hereof,  as  determined  by  said  commissioners,  and  amount- 
ing in  the  aggregate  to  not  less  than  twent3^-thrce  millions  of 
dollars,  after  deducting  one-third  of  the  principal  and  in- 
terest of  such  obligations  as  were  issued  prior  to  the  thirtieth 
day  of  March,  eighteen  hundred  and  seventy-one,  and  also 
deducting  one-third  of  the  principal  and  interest  of  such 
obligations  as  were  issued  under  the  act  approved  the 
thirtieth  day  of  March,  eigliteen  hundred  and  seventy-one, 
as  do  include  West  Virginia's  proportion,  said  bondholders' 
committee  may  at  any  time  on  or  prior  to  the  tliirtieth  day 


APPENDICES.  295 

of  June,  eighteen  hundred  and  ninety-two,  present  the  same 
in  bulk  to  said  commissioners  for  surrender  and  exchange 
as  herein  provided.  All  coupons  matured  or  to  mature  on 
coupon  bonds  after  July  first,  eighteen  hundred  and  ninety- 
one,  or  coupons  of  like  class  and  amount,  or  the  face  value 
thereof  in  cash  shall  be  surrendered  with  such  bonds,  the 
said  cash  to  be  returned  if  projDer  coupons  are  subsequently 
tendered.  And  when  the  said  bondholders'  committee 
shall  have  presented  for  exchange  the  obligations  aforesaid 
to  an  amount  of  twenty-three  millions  of  dollars  or  more, 
if  the  engraved  bonds  hereinbefore  authorized  are  not 
ready  for  exchange,  the  said  commissioners  shall,  upon 
application  of  said  bondholders'  committee,  issue  to  said 
bondiiolders' committee  a  manuscript  registered  bond  of  the 
State  of  Virginia,  substantially  of  the  form  of  the  bond 
hereinbefore  specified,  for  the  aggregate  amount  to  which 
the  said  committee  may  be  entitled  for  the  obligations  so 
presented  under  this  act,  the  said  bond  to  be  exchangeable 
for  the  engraved  bonds  aforesaid  of  character  and  amount 
required  by  said  committee,  as  prescribed  in  this  act,  and 
Interest  in  the  mean  time  on  said  manuscript  bond  shall  be 
paid  as  herein  provided  for  on  the  engraved  bonds. 

D.  The  said  new  bonds  shall  be  issued  to  said  bond- 
holders' committee  by  the  said  commissioners  in  the  follow- 
ing proportion,  to  wit :  nineteen  thousand  dollars  of  the 
new  bonds  to  be  created  under  this  act  shall  be  issued  for 
every  twenty-eight  thousand  of  old  outstanding  obligations 
(principal  and  interest  to  July  first,  eighteen  hundred  and 
ninety-one),  as  aforesaid,  surrendered  by  said  bondholders' 
committee  to  the  said  commissioners,  after  the  deductions 
provided  for  in  paragraph  C  of  this  section  ;  and  a  propor- 
tionate amount  of  said  new  bonds  shall  be  issued  for  smaller 
sums  of  said  outstanding  obligations  so  surrendered :  pro- 
vided that  no  certificates  issued  on  account  of  the  proportion 
of  West  Virjrinia  of  the  oblio^ations  of  the  State  shall  bo 
funded  under  this  act.     When  said  bondholders'  committee 


296  APPENDICES. 

shall  have  surrendered  and  exchanged  such  obligations  as 
aforesaid  to  the  amount  of  at  least  twenty-three  million 
dollars,  said  committee  may  at  any  time  thereafter  up  to 
and  including  the  thirtieth  day  of  June,  eighteen  hundred 
and  ninety-two,  present  to  said  commissioners  for  verifica- 
tion, surrender,  and  exchange  additional  obligations,  prin- 
cipal and  interest,  as  aforesaid;  all  coupons  matured  or 
to  mature  on  coupon  bonds  after  July  first,  eighteen  hun- 
dred and  ninety-one,  or  coupons  of  like  class  and  amount, 
or  the  face  value  thereof  in  cash,  to  be  presented  with  such 
bonds,  the  cash,  if  paid,  to  be  returned  if  proper  coupons 
are  subsequently  tendered.  After  said  commissioners  shall 
have  determined  that  said  obligations  conform  to  the  re- 
quirements of  paragraph  A  hereof,  said  commissioners 
shall  accept  the  obligations  so  presented  for  surrender  and 
exchange  by  said  committee,  and  shall  deliver  to  said  com- 
mittee, in  exchange  tlierefor  new  bonds  issued  under  the 
provisions  of  this  act  in  the  same  proportion  as  is  set  out 
in  this  paragraph  of  this  section,  after  making  the  deduc- 
tions provided  for  in  paragraph  C  of  this  section. 

E.  If  on  making  the  exchange  provided  for  in  this  act 
said  committee  shall  be  found  entitled  to  a  fractional 
amount  or  amounts  less  than  one  hundred  dollars  in  addi- 
tion to  the  new  bonds  delivered  to  it,  said  Commissioners 
of  the  Sinking  Fund  shall  issue  to  the  committee  a  certifi- 
cate or  certificates  for  such  amount  or  amounts.  Such 
fractional  certificates  shall  be  exchangeable  for  the  bonds 
authorized  by  this  act  to  be  issued  in  sums  of  one  hundred 
dollars,  or  any  multiple  thereof,  and  certificates  of  like 
character  shall  be  issued  for  any  fractional  amount  which 
may  remain  in  making  the  exchange. 

6.  For  all  balances  of  the  indebtedness,  constituting  West 
Virginia's  share  of  the  old  debt,  principal  and  interest,  in 
the  settlement  of  Virginia's  equitable  share  of  the  bonds 
authorized  to  be  exchanged  under  this  act,  the  said  share 
having  been  heretofore  determined  by  the  Commonwealth 


APPENDICES.  297 

of  Virginia,  the  said  commissioners  shall  issue  certificates 
substantially  in  the  following  form,  viz. : 

No. .     The  Commonwealth  of  Virginia  has  this  day 

discharged  her  equitable  share  of  the  (registered  or  coupon, 

as  the  case  may  be)  bond  for dollars,  dated 

day  of ,  and  No. ,  leaving  a  balance  of 

dollars,  with  interest  from ,  to  be  accounted  for  to  the 

holder  of  this  certificate  by  the  State  of  West  Virginia,  with- 
out recourse  u^^on  this  Commonwealth. 

Done  at  the  capital  of  the  State  of  Virginia,  this 

day  of ,  eighteen  hundred  and  ninety-two. 

,  Second  Auditor. 

,  Treasurer. 

The  ceitificates  so  issued  under  sections  five  and  six  of 
this  act  shall  be  recorded  by  the  second  auditor  in  a  book 
kept  for  that  purpose,  giving  the  date  and  number  of  the 
transaction  to  which  it  refers,  the  amount  of  certificates, 
and  the  name  of  the  person  or  corporation  to  whom  issued 
and  delivered ;  and  as  such  certificates,  authorized  by  par- 
agraph E,  section  five  of  this  act,  are  exchanged,  the  same 
shall  be  cancelled  and  preserved  as  herein  provided  in 
respect  to  the  evidences  of  debt  refunded. 

7.  The  Commissioners  of  the  Sinking  Fund  are  hereby 
authorized  and  required  to  receive  on  deposit  for  verification, 
classification,  and  exchange  such  of  the  said  obligations  of 
the  State  as  may  be  presented  to  said  commissioners ;  })ro- 
vided,  that  said  commissioners  shall  not  receive  on  deposit 
for  the  purposes  aforesaid  any  outstanding  obligations  of 
the  State  which  have  been  once  deposited  with  the  bond- 
holders' committee,  or  may  be  hereafter  deposited  with 
them ;  the  said  verification  and  exchange  for  the  new  bonds 
of  the  obligations  so  deposited  to  be  conducted  in  the  same 
manner  as  hereinbefore  provided  witli  respect  to  the  obli- 
gations deposited  with  the  said  bondholders'  committee ; 
and  the  said  Commissioners  of  the  Sinking  Fund  shall  issue 


298  APPENDICES.      • 

to  and  distribute  amongst  said  depositing  creditors  after 
they  have  fully  complied  with  the  terms  of  this  act,  in  ex- 
change for  the  obligations  so  deposited,  bonds  authorized 
by  this  act  as  follows,  viz.  :  To  each  of  the  several  classes 
of  said  depositing  creditors  the  same  proportion,  as  nearly 
as  may  be  found  in  their  judgment  practicable  by  the  Com- 
missioners of  the  Sinking  Fund,  as  the  same  class  shall  re- 
ceive under  the  distribution  which  shall  be  made  by  the 
commission  for  the  creditors  represented  by  the  bondholders' 
committee :  provided,  that  no  obligations  shall  be  received 
for  such  deposit  after  the  thirtieth  day  of  June,  eighteen 
hundred  and  ninety-two,  nor  shall  any  coupon  bonds  be 
received  which  do  not  have  attached  thereto  all  the  coupons 
maturing  after  July  first,  eighteen  hundred  and  ninety-one ; 
but  for  any  such  coupons  as  may  be  missing,  coupons  of 
like  class  and  amount,  or  the  face  value  thereof  in  cash, 
may  be  received ;  the  said  cash,  if  paid,  to  be  returned  if 
proper  coupons  are  subsequently  tendered;  and  each*  de- 
positor shall,  when  he  receives  his  distributive  share  of 
the  said  new  issue  of  bonds,  pay  to  the  Commissioners  of  the 
Sinking  Fund  three  and  one-half  per  centum  in  cash  of  the 
par  value  of  the  bonds  received  by  him,  or  a  commission 
equal  in  amount  to  that  which  may  at  any  time  hereafter 
be  fixed  by  the  said  committee  of  bondholders  upon  any 
bonds  deposited  with  them,  not,  however,  in  any  case  to 
exceed  three  and  one-half  per  cent ;  and  said  Sinking  Fund 
Commissioners  shall  cover  the  fund  thus  received  into  the 
treasury  of  the  Commonwealth.  .  .  . 

10.  In  the  year  nineteen  hundred  and  ten,  and  annually 
thereafter,  there  shall  be  set  apart  of  the  revenue  collected 
from  the  property  of  the  State  each  year  up  to  and  includ- 
ing the  year  nineteen  hundred  and  twenty-nine,  one-half  of 
one  per  cent  upon  the  bonds  issued  under  this  act,  as  well 
as  upon  the  outstanding  bonds  issued  under  act  approved 
February  fourteenth,  eighteen  hundred  and  eighty-two; 
and  in  the  year  nineteen  hundred  and  thirty,  and  annually 


APPENDICES.  299 

thereafter  until  all  the  bonds  issued  under  this  act  and  the 
said  act  approved  February  fourteenth,  eighteen  hundred 
and  eighty-two,  are  paid,  there  shall  be  set  apart  of  the 
revenue  collected  from  the  property  of  the  State  each  year 
one  per  cent  upon  the  outstanding  bonds  issued  under  the 
aforesaid  acts,  which  shall  be  paid  into  the  treasury  to 
the  credit  of  the  sinking  fund,  and  the  Commissioners  of  the 
Sinking  Fund  shall  annually,  or  oftener,  apply  the  same  to 
the  redemption  or  purchase  (at  a  rate  not  above  par  and 
accrued  interest)  of  the  bond  issued  under  the  aforesaid 
acts,  and  the  bonds  so  redeemed  shall  be  cancelled  by  the 
said  commissioners  and  the  same  registered  by  the  second 
auditor  in  a  book  to  be  kept  for  that  purpose,  giving  the 
number  and  date  of  issue,  the  character,  the  amount,  and 
the  owner  at  the  time  of  purchase,  of  the  bonds  so  redeemed 
and  cancelled ;  and  in  case  no  such  purchase  of  bonds  can 
be  made,  then  the  amount  which  can  be  redeemed  shall  be 
called  in  by  lot,  as  provided  in  section  two  of  this  act.  All 
bonds  of  the  State  issued  under  the  provisions  of  the  act 
aforesaid,  approved  February  fourteenth,  eighteen  hundred 
and  eighty-two,  and  now  held  by  said  Commissioners  of  the 
Sinking  Fund,  shall  as  soon  as  at  least  fifteen  millions  of 
dollars  of  new  bonds  shall  have  been  issued  and  delivered 
pursuant  to  the  provisions  of  this  act,  be  cancelled  by  said 
commissioners  and  preserved  in  the  office  of  the  treasurer 
of  the  Commonwealth. 

12.  All  coupons  heretofore  tendered  for  taxes  and  held 
by  said  tax-payers  in  pursuance  of  such  tender,  shall  be 
received  in  payment  of  the  taxes  for  which  they  were  ten- 
dered, and  upon  their  delivery  to  the  proper  collector  or 
the  amount  thereof  in  money,  the  judgments  obtained 
against  the  said  tax-payers  for  such  taxes  shall  be  marked 
satisfied :  provided  the  said  tax-payers  shall  have  paid  in 
money,  and  not  in  coupons,  the  costs  of  said  judgments. 
All  coupons  heretofore  tendered  for  taxes  and  held  by  the 
officers  of  the  Commonwealth  for  verification  in  pursuance 


300  APPENDICES. 

of  tlie  statute  in  such  case  made  and  provided,  shall  be 
received  in  payment  of  the  taxes  for  which  they  were  ten- 
dered, and  the  money  collected  for  such  taxes  returned  to 
the  parties  from  whom  it  was  received :  provided  the  said 
tax-payers  shall  have  paid  in  money,  and  not  in  coupons, 
all  costs  incurred  in  legal  proceeding  to  verify  said  cou- 
pons. 

13.  The  treasurer  of  the  Commonwealth  is  authorized 
and  directed  to  pay  the  interest  on  the  bonds  issued  under 
this  act  as  the  same  shall  become  due  and  payable  out  of 
any  money  in  the  treasury  not  otherwise  appropriated. 

16.  The  act  entitled  "An  act  to  ascertain  and  declare 
Virginia's  equitable  share  of  the  debt  created  before  and 
actually  existing  at  the  time  of  the  partition  of  her  territory 
and  resources,  and  to  provide  for  the  issuance  of  bonds 
covering  the  same,  and  the  regular  and  prompt  payment  of 
interest  thereon,"  approved  February  fourteenth,  e'ighteen 
hundred  and  eighty-two,  and  the  amendments  thereto,  to- 
wit:  An  act  entitled  *'  An  act  to  declare  the  true  intent  and 
meaning  of,  and  to  amend  and  re-enact  section  five  of  chap- 
ter eighty-four  of  acts  eighteen  hundred  and  eighty-one 
and  eighteen  hundred  and  eighty -two,  approved  February 
fourteenth,  eighteen  hundred  and  eighty-two,"  approved 
August  twenty-seventh,  eighteen  hundred  and  eighty-four; 
and  the  act  entitled  "An  act  to  amend  and  re-enact  an  act 
approved  August  twenty-seventh,  eighteen  hundred  and 
eighty-four,  entitled  an  act  to  declare  the  true  intent  and 
meaning  of,  and  to  amend  and  re-enact  section  five  of  cliap- 
ter  eighty-four  of  acts  of  eighteen  hundred  and  eighty-one 
and  eighteen  hundred  and  eighty-two,  approved  February 
fourteenth,  eighteen  hundred  and  eighty-two,"  approved 
November  twenty-ninth,  eighteen  hundred  and  eighty-four, 
are  hereby  repealed. 

17.  The  Commissioners  of  the  Sinking  Fund  are  author- 
ized, if  it  shall  seem  to  them  for  the  best  interest  of  the 
Commonwealth,  to  make  one  extension  of  the  time  for  the 


APPENDICES.  301 

funding  of  the  said  twentj^-eight  millions  of  dollars  of  out- 
standing evidences  of  debt  for  a  period  not  exceeding  six 
months  from  the  thirtieth  day  of  June,  eighteen  hundred 
and  ninety-two. 


APPENDIX  V. 

EXTRACTS   FROM    THE   INTERNAL    IMPROVEMENTS    AND    THE 
DEBT-SETTLEMENT  ACT  OF  TENNESSEE. 

Acts  of  Tennessee,  1851-52,  Chap.  151  —  An  Act  to 
establish  a  system  of  internal  improvements  in  this  State. 
Section  1.  Be  it  enacted  by  the  General  Assembly  of  the 
State  of  Tennessee,  That  whenever  the  East  Tennessee  and 
Virginia  Railroad  Company  shall  have  procured  bonajide 
subscriptions  for  the  capital  stock  in  said  company  to  an 
amount  sufficient  to  grade,  bridge,  and  prepare  for  the  iron 
rails  the  whole  extent  of  the  main  trunk  line  proposed  to 
be  constructed  by  said  company,  and  it  shall  be  shown  by 
said  company  to  the  Governor  of  the  State  that  said  sub- 
scriptions are  good  and  solvent,  and  whenever  said  com- 
pany shall  have  graded,  bridged,  and  shall  have  ready  to 
put  down  the  necessary  timbers  for  the  reception  of  rails, 
and  fully  prepared  a  section  of  thirty  miles  of  said  road  at 
either  terminus  in  a  good  and  substantial  manner,  with 
good  materials,  for  putting  on  the  iron  rails  and  equip- 
ments, and  the  Governor  shall  be  notified  of  these  facts, 
and  that  said  section  or  any  part  thereof  is  not  subject  to 
any  lien  whatever  other  than  those  created  in  favor  of  the 
State  by  the  acts  of  1851-52  by  the  written  affidavits  of 
the  chief  engineers  and  president  of  said  company,  together 
with  the  written  affidavit  of  a  competent  engineer,  by  him 
appointed  at  the  cost  of  the  company  to  examine  said  sec- 
tion, then  said  Governor  shall  issue  to  said  company  coupon 
bonds  of  the  State  of  Tennessee  to  an  amount  not  exceeding 


802  APPENDICES. 

eight  thousand  dollars  per  mile  on  said  section,  and  on  no 
other  condition,  which  bonds  shall  be  payable  at  such  place 
in  the  United  States  as  the  president  of  the  company  may 
designate,  bearing  an  interest  of  six  per  cent  per  annum, 
payable  semi-annually,  and  not  having  more  than  forty  nor 
less  than  thirty  years  to  mature. 

Sec.  2.  Be  it  enacted.  That  the  bonds  before  specified 
shall  not  be  used  by  said  comj^any  for  any  other  purpose 
than  for  procuring  the  iron  rails,  chairs,  spikes,  and  equip- 
ments for  said  section  of  said  road,  and  for  putting  down 
said  iron  rails.   .  .  . 

Sec.  3.  Be  it  enacted.  That  so  soon  as  the  bonds  of  the 
State  shall  have  been  issued  for  the  first  section  of  the  road 
as  aforesaid,  they  shall  constitute  a  lien  upon  said  section 
so  prepared  as  aforesaid,  including  the  road-bed,  right  of 
way,  grading,  bridges,  and  masonry,  upon  all  the  stock 
subscribed  for  in  said  company,  and  upon  said  iron  rails, 
chairs,  spikes,  and  equipments,  when  purchased  and  de- 
livered, and  the  State  of  Tennessee,  upon  the  issuance  of 
said  bonds  and  by  virtue  of  the  same,  sliall  be  invested  with 
said  lien  or  mortgage  without  a  deed  from  the  company, 
for  the  payment  by  said  company  of  said  bonds,  with  the 
interest  thereon  as  the  same  becomes  due. 

Sec.  4.  Be  it  enacted.  That  when  said  company  shall 
have  prepared  as  aforesaid  a  second  section,  or  any  addi- 
tional number  of  sections,  of  twenty  miles  each  of  said 
road,  connecting  with  the  section  already  completed,  for 
the  iron  rails,  chairs,  spikes,  and  equipments,  as  provided 
in  the  first  section  of  tliis  act,  and  tlie  Governor  shall  be 
notified  of  this  fact  as  before  provided,  he  shall  in  like 
manner  issue  to  said  company  like  bonds  of  the  State  of 
Tennessee  to  an  equal  amount  vvitli  tliat  before  issued  under 
tlie  first  section  of  this  act,  for  eacli  and  every  section  of 
twenty  miles  of  said  road  so  prepared  as  aforesaid,  but 
upon  the  terms  and  conditions  hereinbefore  provided,  and 
upon  the  issuance  of  the  said  bonds,  the  State  of  Tennessee 


APPENDICES.  303 

shall  be  invested  with  a  like  mortgage  or  lien,  without  a 
deed  from  said  company,  upon  said  stock  and  upon  said 
first  and  additional  section  or  sections  of  said  road  so  pre- 
pared, upon  the  rails  and  equipments  put  or  to  be  jDut  upon 
the  same,  for  the  payment  of  said  bonds  and  the  accruing 
interest  thereon.  .  .  . 

Sec.  5.  Be  it  enacted.  That  it  shall  be  the  duty  of  said 
company  to  deposit  in  the  Bank  of  Tennessee  at  Nashville 
at  least  fifteen  days  before  the  interest  becomes  due  from 
time  to  time,  upon  said  bonds  issued  as  aforesaid,  an 
amount  sufficient  to  pay  such  interest,  including  exchange 
and  necessary  commissions,  or  satisfactory  evidence  that 
said  interest  has  been  paid  or  provided  for,  and  if  said  com- 
pany fail  to  deposit  said  interest  as  aforesaid,  or  furnish 
the  evidence  aforesaid,  it  shall  be  the  duty  of  the  comp- 
troller to  report  that  fact  to  the  Governor,  and  the  Governor 
shall  immediately  appoint  some  suitable  jDerson  or  persons, 
at  the  expense  of  the  company,  to  take  possession  and  con- 
trol of  said  railroad  and  all  the  assets  thereof,  and  manage 
the  same  and  receive  the  rents,  issues,  profits,  and  dividends 
thereof,  whose  duty  it  shall  be  to  give  bond  and  security  to 
the  State  of  Tennessee  in  such  penalty  as  the  Governor 
may  require,  for  the  faithful  discharge  of  his  or  their  duty 
as  receiver  or  receivers  to  receive  said  rents,  issues,  profits, 
and  dividends,  and  pay  over  the  same  under  the  direction 
of  the  Governor  towards  the  liquidation  of  such  unpaid 
interest.  .  .  . 

Sec.  6.  Be  it  enacted,  That  if  said  company  shall  fail  or 
refuse  to  pay  any  of  said  bonds  when  they  fall  due,  it  shall 
be  the  duty  of  the  Governor  to  notify  the  Attorney-General 
of  the  district  in  which  is  situated  the  place  of  business  of 
said  company,  of  the  fact,  and  thereupon  said  Attorney- 
General  shall  forthwith  file  a  bill  against  said  company  in 
the  name  of  the  State  of  Tennessee  in  the  chancery  or  cir- 
cuit court  of  the  county  in  which  is  situated  said  place  of 
business,  setting  forth  the  facts,  and  thereupoa  said  court 


304  APPENDICES. 

shall  make  all  such  orders  and  decrees  in  said  cause  as  may 
be  deemed  necessary  by  the  court  to  receive  the  payment 
of  said  bonds  with  the  interest  thereon,  and  to  indemnify 
the  State  of  Tennessee  against  any  loss  on  account  of  the 
issuance  of  said  bonds  by  ordering  said  railroad  to  be 
placed  in  the  hands  of  a  receiver,  ordering  the  sale  of  said 
road  and  all  the  property  and  assets  attached  thereto  or 
belonging  to  said  company,  or  in  such  other  manner  as  the 
court  may  deem  best  for  the  interest  of  the  State. 

Sec.  7.  Be  it  enacted,  That  at  the  end  of  five  years  after 
the  completion  of  said  road,  said  company  shall  set  apart 
one  per  centum  per  annu7n  upon  the  amount  of  the  bonds 
issued  to  the  company,  and  shall  use  the  same  in  the  pur- 
cliase  of  bonds  of  the  State  of  Tennessee,  which  bonds  the 
company  shall  pay  into  the  treasury  of  the  State,  after  as- 
signing them  to  the  Governor,  and  for  which  the  Governor 
shall  give  said  comjDany  a  receipt.  .  .  . 

Sec.  10.  Be  it  enacted,  That  the  provisions  of  this  act  shall 
extend  to  and  embrace  the  Chattanooga,  Harrison,  George- 
town, and  Charleston  Railroad  Company,  the  Nashville  and 
North-western  Railroad  Company,  the  Louisville  and  Nash- 
ville Railroad  Company,  the  South-western  Railroad  Com- 
pany, the  McMinnviUe  and  Manchester  Railroad  Company, 
tlie  Memphis  and  Charleston  Railroad  Company,  the 
Nashville  and  Southern  Railroad  Company,  the  Mobile 
and  Ohio  Railroad  Company,  the  Nashville  and  Memphis 
Railroad  Company,  the  Nashville  and  Cincinnati  Railroad 
Company,  the  East  Tennessee  and  Georgia  Railroad  Com- 
pany, the  Memphis,  Clarksville,  and  Louisville  Railroad 
Company,  and  the  Winchester  and  Alabama  Railroad  Com- 
pany, so  far  as  the  main  trunk  roads  to  be  constructed  by 
said  companies  lie  within  the  limits  of  this  State,  and  not 
otherwise,  and  said  companies  shall  have  all  the  powers 
and  privileges  and  be  subject  to  all  the  restrictions  and 
liabilities  contained  in  this  act.  .  .  . 

Sec.  12.    Be  it  enacted,  That  the  State  of  Tennessee  ex- 


APPENDICES.  305 

pressly  reserves  the  right  to  enact  by  the  legislature  thereof 
hereafter  all  such  laws  as  may  be  deemed  necessary  to 
protect  the  interest  of  the  State,  and  to  secure  the  State 
against  any  loss  in  consequence  of  the  issuance  of  bonds 
under  the  provisions  of  this  act.  But  in  such  a  manner  as 
not  to  impair  the  vested  rights  of  the  stockholders  of  the 
compan3^ 

Sec.  13.  Be  it  enacted,  That  it  shall  be  the  duty  of  the 
Governor  from  time  to  time  when  there  shall  be  reliable 
information  given  to  him  that  any  railroad  company  shall 
have  fraudulently  obtained  the  issuance  of  the  bonds  of  the 
State,  or  sliall  have  obtained  any  of  said  bonds  contrary  to 
the  provisions  of  this  act,  he  shall  notify  the  Attorney- 
General  of  this  State,  whose  duty  it  shall  be  forthwith  to 
institute  in  the  name  of  the  State  a  suit  in  the  circuit  or 
chancery  court  of  the  county  of  the  j^lace  of  business  of 
the  company  setting  forth  the  facts.  And  when  the  facts 
shall  satisfactorily  appear  to  the  court  that  any  of  said 
bonds  shall  have  been  fraudulently  obtained,  or  obtained 
contrary  to  the  true  intent,  meaning,  and  provisions  of  this 
act,  then  and  in  such  case  the  court  shall  order,  adjudge, 
and  decree,  that  said  road  lying  in  the  State,  with  all  the 
property  and  assets  of  said  company,  or  a  sufficiency  there- 
of, shall  be  sold,  and  the  proceeds  shall  be  paid  into  the 
treasury,  and  it  shall  be  the  duty  of  the  comptroller  imme- 
diately to  vest  the  same  in  stock,  creating  a  sinking  fund  as 
provided  for  in  the  seventh  section  of  this  act.  And  said 
company  shall  forfeit  all  rights  and  privileges  under  the 
provisions  of  this  act.  And  the  stockholders  thereof  shall 
be  individually  liable  for  the  payment  of  the  bonds  so 
fraudulently  obtained  by  said  company,  and  for  all  other 
losses  that  may  fall  upon  the  State  in  consequence  of  the 
commission  of  any  other  fraud  by  said  company,  excepting 
such  stockholders  as  may  show  to  the  said  court  that  they 
were  ignorant  of  or  opposed  to  the  perpetration  of  such 
frauds  by  the  company. 

(^Passed  Feb.  11,  1852.) 


306  APPENDICES. 

An  Act  to  settle  the  amount  of  the  public  debt  of  the  State,  fix 
the  rale  of  interest  thereon,  provide  for  the  funding  thereof, 
and  the  compensation  of  the  officers  of  the  State  thereof. 

Whereas,  A  large  part  of  the  bonded  indebtedness  of 
Tennessee  is  composed  of  interest  which  accumulated  dur- 
ing the  war  between  the  States,  when  the  people  were  unable 
and  also  forbidden  to  pay  the  same,  and  under  such  circum- 
stances as  relieved  private  trustees  from  the  obligation  to 
pay  interest  on  trust  funds  ;  and 

Whereas,  This  illegal  war  interest  was  under  the  forms 
of  law  funded  into  six  per  cent  bonds  at  a  time  when  a  large 
majority  of  the  citizens  of  the  State  were  disfranchised  and 
denied  any  voice  in  the  administration  of  its  government, 
and  has  since  for  many  years  borne  interest  upon  interest, 
until  now  it  constitutes  about  one-third  of  the  entire  debt; 
and 

Whereas,  Over  seven-eighths  of  the  indebtedness  claimed 
against  the  State  of  Tennessee  consists  of  bonds  loaned  by 
the  State  to  railroad  companies  on  the  faith  and  credit  of 
their  property,  composing  what  is  known  to  the  people  of 
Tennessee  as  the  railroad  debt,  and  constituting  an  indebt- 
edness, for  the  payment  of  which,  the  railroad  companies 
were  primarily  liable  and  principal  debtors ;  and 

AVhereas,  A  large  part  of  the  railroad  debt  arose  out  of 
the  calamity  of  civil  war,  whereby  the  railroad  companies 
were  unable  to  accumulate  profits,  and  the  property  was 
destroyed  or  appropriated  to  the  uses  of  the  belligerents ; 
and 

Whereas,  Another  large  part  of  said  railroad  debt  ac- 
crued to  the  State  by  reason  of  faithless  management  in 
recklessly  loaning  the  bonds  of  the  State  without  a  compli- 
ance with  the  restrictions  and  limitations  enacted  for  its 
protection  at  a  time  when  a  majority  of  the  people  of  Ten- 
nessee were  not  permitted  to  have  a  voice  in  selecting  their 
governing  agents ;  and 


APPENDICES.  307 

Whereas,  A  large  majority  of  the  bonds  loaned  by  the 
State  to  railroad  companies  were  contrary  to  law,  sold  at 
less  than  half  their  nominal  value  for  National  currency  at 
a  time  when  its  purchasing  power  was  far  below  that  of 
coin,  and  the  burden  of  the  State,  by  reason  of  such  illegal 
sale  of  its  bonds,  and  the  depreciation  of  railroad  property, 
consequent  on  the  appreciation  of  currency,  was  greatly 
increased;  and 

Whereas,  No  interest  coraf)aratively  has  been  paid  on  the 
debt  since  the  beginning  of  the  war  between  the  States,  but 
the  principal  has  been  wrongfully  and  unlawfully  increased, 
as  herein  stated,  while  the  accrued  interest  has  been  com- 
pounded from  time  to  time  by  funding  the  same,  under 
various  Acts,  into  bonds  bearing  interest  at  a  rate  double 
that  paid  by  other  States  and  nations  in  the  money  centres 
of  the  world  for  the  use  of  capital ;  and 

Whereas,  Owing  to  the  constant  accumulation  of  the 
debt  and  the  indisposition  of  the  people  to  submit  to  unjust 
exactions  under  the  forms  of  law,  the  public  credit  has 
been  impaired  and  speculators  have  thereby  been  enabled  to 
buy  up  the  bonds  of  the  State  at  less  than  half  their  nominal 
value;  and 

AVhereas,  For  the  foregoing  reasons,  the  conviction  is 
deeply  rooted  in  the  public  conscience  that  the  larger  jiart 
of  the  debt  is  inequitable  and  unjust  in  its  consideration  if 
not  illegal  in  its  obligation,  and  the  public  creditors  have 
for  years  conceded  the  right  of  the  State  to  a  reduction  of 
their  claims  on  account  of  its  undoubted  equities  ;  and 

Whereas,  By  reason  of  the  calamities  of  war  resulting 
in  the  loss  of  half  the  material  resources  of  the  State,  and 
to  that  extent  diminishing  the  sources  of  revenue,  and  by 
reason  of  the  imperative  necessity  growing  out  of  the  war 
for  an  increase  of  taxes  for  the  support  of  public  schools  and 
other  purposes,  the  people  of  Tennessee  have  and  do  entertain 
the  convictions  that  it  is  their  right  and  duty  to  insist  upon 
a  recognition  of  these  equities  in  any  settlement  that  may 


308  APPENDICES. 

be  made  of  the  public  debt,  and  that  they  are  justified  by 
good  morals  and  the  example  of  other  free  States  in  look- 
ing beyond  the  letter  of  bonds  and  paying  in  their  satis- 
faction such  an  amount  as  the  demands  of  justice  and  good 
conscience  or  sound  public  policy  may  require  ;  and 

Whereas,  By  reason  of  the  wide  difference  in  the  various 
propositions  of  settlement  heretofore  submitted  by  the  pub- 
lic creditors,  and  the  bitter  and  acrimonious  controversies 
growing  out  of  the  discussion  of  the  question  resulting  in 
injury  to  the  State,  it  has  become  the  duty  of  the  people  to 
put  an  end  to  controversy  and  unprofitable  negotiation  by 
finally  fixing  and  tendering  the  amount  they  will  j^ay ;  and 

Whereas,  A  large  majority  of  the  peoi^le  of  Tennessee 
have  given  a  distinct  expression  of  their  will  on  this  sub- 
ject, and  declare  that  on  grounds  of  public  policy  they  will 
pay  in  full  the  bonds  held  by  Mrs.  James  K.  Polk,  and  all 
bonds  held  by  educational,  literary  and  charitable  institutions 
in  this  State ;  that  they  will  pay  in  discharge  of  their  just 
obligation,  what  is  known  to  them  as  the  State  debt  proper, 
in  full  less  war  interest,  and  that  in  comj^romise  of  the 
remainder  of  the  debt,  known  to  them  as  the  railroad  debt, 
they  will  pay  one-half  of  the  principal  and  accrued  inter- 
est by  issuing  therefor  bonds  of  the  State,  bearing  interest 
at  the  rate  of  three  per  cent  per  annum ;  now  therefore. 

Section  1.  Be  it  enacted  by  the  Qeneral  Assembly  of  the 
State  of  Tennessee,  That  the  bonds  comprising  the  State 
debt  proper  of  the  State,  is  as  follows :  — 

Capitol  bonds $493,000 

Hermitage  bonds 35,000 

Agricultural  bonds 18,000 

Union  Bank  bonds 125,000 

Bank  of  Tennessee  bonds 214,000 

Bonds  issued  to  turnpike  companies    ....  741,000 

Hiawassee  Railroad  bonds 280,000 

East  Tennessee  and  Georgia  llailroad  bonds    .     .  144,000 

Memphis  and  LaGrange  Kaihoad  bonds    .    .    .  68,000 


APPENDICES.  309 

together  with  the  unpaid  coupons  thereto  attached,  inchid- 
ing  the  coupons  maturing  the  first  day  of  July,  eighteen 
hundred  and  eighty-three,  whether  said  bonds  are  in  the 
form  as  first  issued  or  funded  under  the  Acts  of  eighteen 
hundred  and  sixty-six,  eighteen  liundred  and  sixty-eight  and 
eighteen  hundred  and  seventy-tliree :  Provided,  they  can  be 
traced  to  any  one  of  the  aforesaid  State  debt  proper  bonds 
when  first  issued,  shall  be  fimded  into  new  coupon  bonds 
upon  the  following  basis  :  SuchjDart  of  the  State  debt  proper 
as  now  bears  interest  at  the  rate  of  six  per  cent  joer  annum 
shall  be  funded  by  adding  to  the  sum  of  the  face  of  the 
existing  bond  the  matured  interest  thereon,  evidenced  by 
the  coupons  thereto  attached,  including  the  coupons  matur- 
ing the  first  day  of  July,  eighteen  hundred  and  eighty-three, 
and  from  the  total  sum  of  the  face  of  the  bonds  and  matured 
interest  thereon,  evidenced  by  tlie  coupons  attached,  twenty- 
four  per  cent  will  be  deducted,  and  the  remainder  funded 
in  coupon  bonds,  bearing  interest  at  the  rate  of  six  per  cent 
per  annum.  Such  part  of  the  State  debt  proper  as  now 
bears  interest  at  the  rate  of  five  and  one-fourth  per  cent 
per  annum,  shall  be  funded  by  adding  to  the  sum  of  the  face 
of  the  existing  bonds  the  matured  interest  thereon,  includ- 
ing tlie  coupons  maturing  the  first  day  of  July,  eighteen 
hundred  and  eighty-three,  evidenced  by  the  coupons  thereto 
attached,  and  from  the  total  sum  of  the  face  of  the  bonds 
and  the  accrued  interest,  twenty-one  per  cent  will  be  deducted, 
and  the  remainder  funded  in  coupon  bonds  bearing  interest 
at  the  rate  of  five  and  one-fourth  per  cent  per  annum.  Such 
part  of  said  State  debt  proper  as  now  bears  interest  at  the 
rate  of  five  per  cent  per  annum  shall  be  funded  by  adding 
to  the  face  of  the  existing  bond  and  matured  interest  thereon, 
including  the  coupons  maturing  the  first  day  of  July,  eigh- 
teen hundred  and  eighty-three,  evidenced  by  the  coupons 
thereto  attached,  and  from  the  total  sum  of  the  face  of  the 
bond  and  the  accrued  interest,  twenty  per  cent  will  be 
deducted,  and  the  remainder  funded  into   coupon   bonds 


310  APPENDICES. 

bearing  interest  at  the  rate  of  five  per  cent  per  annum : 
Provided,  however.  That  none  of  the  bonds  or  parts  of  bonds 
heretofore  issued  under  the  previous  funding  acts  for  ma- 
tured coupons,  shall  be  funded  under  this  section  as  State 
debt  proper  bonds,  but  the  same  shall  be  funded  at  fifty 
cents  on  the  dollar  and  three  per  cent  interest,  in  the  man- 
ner prescribed  in  Section  two  of  this  Act :  A7id  provided 
further,  That  where  any  State  debt  proper  bonds  are  jDast 
due,  interest  thereon  shall  be  calculated  from  the  date  of 
maturing,  at  the  rate  the  bonds  bore  before  they  were  due,  as 
if  coupons  were  thereto  attached  :  And  provided  further,  that 
none  of  the  bonds  above  enumerated  shall  be  funded  under 
this  section  as  part  of  the  State  debt  proper,  if  it  shall  be 
found  on  examination  that  they  were  bonds  loaned  to  turn- 
pike or  railroad  companies,  and  in  no  event  shall  the  prin- 
cipal of  the  amount  funded  under  this  section  exceed  two 
million  one  hundred  and  eighteen  thousand  dollars :  Provided 
further,  if  it  shall  appear  that  there  is  an  excess  in  any  class, 
and  a  deficiency  in  some  other  class  in  the  amounts  as  above 
enumerated,  then  such  excess  shall  be  funded  under  this 
section  to  the  extent  of  such  deficiency. 

Sec.  2.     Be  it  further  enacted.  That  the  remainder  of  the 
public  debt,  evidenced  by  bonds  outstanding,  as  follows :  — 

Ante-war  railroad  bonds $8,583,000 

Post-war  railroad  bonds 2,638,000 

Funded  under  the  Act  of  1866 2,246,000 

Funded  under  the  Act  of  1868 569,000 

Funded  under  the  Act  of  1873 4,867,000 

together  with  the  accrued  interest  thereon,  evidenced  by 
the  matured  coupons  thereto  attached,  including  the  coupons 
maturing  the  first  day  of  July,  eighteen  hundred  and  eighty- 
three,  less  the  State  debt  proper  bonds  funded  under  the  Acts 
of  eighteen  hundred  and  sixty-six,  eighteen  hundred  and 
sixty-eight,  and  eighteen  hundred  and  seventy-three,  and 
funded  under  section  one  of  this  Act  as  a  part  of  State  debt 
proper,  be  funded  with  cou^Jon  bonds  upon  the  following 


APPENDICES.  311 

basis :  To  the  sum  of  the  face  of  each  existing  bond  will  be 
added  the  matured  interest  thereon,  including  the  coupons 
maturing  the  first  day  of  July,  eighteen  hundred  and  eighty- 
three,  evidenced  by  the  coupons  thereto  attached  and  one- 
half  of  the  total  sum  of  each  bond,  and  matured  interest 
to  be  funded  with  coupon  bonds,  and  said  bonds  to  bear 
interest  at  the  rate  of  three  per  cent  per  annum. 

Sec.  3.  Be  it  further  enacted,  That  such  part  of  the 
before  recited  public  debt  of  the  State  as  may  have  been 
funded  under  the  Act  of  eighteen  hundred  and  eighty -two, 
shall  be  funded  under  this  Act  upon  the  following  basis : 
To  the  sum  of  the  face  of  each  of  said  bonds  shall  be  added 
the  coupons  now  matured  thereto  attached,  including  the 
coupons  maturing  the  first  day  of  July,  eighteen  hundred 
and  eighty-three,  and  five-sixths  of  such  total  amount  of  each 
bond  to  be  funded  into  coupon  bonds,  and  said  bonds  to 
bear  interest  at  the  rate  of  three  per  cent  per  annum; 
except  such  State  debt  proper  bonds  as  set  out  and  desig- 
nated in  section  one  of  this  Act,  and  funded  under  the  Act 
of  eighteen  hundred  and  eighty-two,  which  shall  be  funded 
by  adding  to  the  face  of  each  of  said  bonds  the  matured 
coupons  thereto  attached,  including  the  coupons  maturing 
the  first  day  of  July,  eighteen  hundred  and  eighty-three,  to 
which  shall  be  added  twenty-six  and  two-thirds  per  cent  on 
bonds  that  bore  six  per  cent  when  originally  issued  and 
funded  into  new  coupon  bonds  bearing  interest  at  the  rate 
of  six  per  cent  per  annum,  and  to  such  part  of  said  State 
debt  proper  bonds  as  bore  interest  at  the  rate  of  five  and 
one-fourth  per  cent  when  originally  issued,  shall  be  added 
thirty-one  and  two-thirds  per  cent,  and  they  shall  be  funded 
into  new  coupon  bonds  bearing  interest  at  the  rate  of  five 
and  one-fourth  per  cent  per  annum,  and  to  such  part  of 
said  State  debt  proper  bonds  as  bore  interest  at  the  rate  of 
five  per  cent  when  originally  issued  shall  be  added  thirty- 
three  and  one-third  per  cent,  and  they  shall  be  funded  into 
such  coupon  bonds  bearing  interest  at  the  rate  of  five  per 


312  APPENDICES. 

cent  per  annum ;  Provided  however,  that  bonds  issued  under 
the  Act  of  eighteen  hundred  and  eighty-two,  for  matured 
coupons,  shall  be  funded  as  prescribed  in  the  first  proviso 
to  the  first  section  of  this  Act. 

Sec.  4.  j5e^■^/Mr^^erc7^aciec?,  That  it  shall  not  be  lawful, 
under  this  Act,  to  allow  any  interest  upon  past  due  coupons 
attached  to  any  class  of  bonds  authorized  to  be  funded 
under  this  Act. 

Sec.  5.  Be  it  further  enacted.  That  all  of  the  existing 
bonds  of  the  State  held  by  educational,  literary,  and  chari- 
table institutions  of  the  State,  on  the  first  day  of  January, 
eighteen  hundred  and  eighty-two,  and  the  twenty-nine 
bonds  held  by  the  widow  of  James  K.  Polk  are  excepted 
out  of  the  provisions  of  this  Act. 

Sec.  6.  Be  it  further  enacted.  All  of  said  bonds  shall  bear 
date  the  first  day  of  July,  eighteen  hundred  and  eighty- 
three,  be  payable  thirty  years  after  the  date  thereof,  be 
redeemable  at  the  pleasure  of  the  State  after  the  expiration 
of  five  years,  the  interest  payable  at  the  office  of  the  Treas- 
urer of  the  State  at  Nashville,  semi-annually,  on  the  first 
day  of  January  and  July  of  each  year,  the  first  coupon  to 
mature  the  first  day  of  January-,  eighteen  hundred  and 
eighty-four,  and  said  bonds  shall  be  of  the  following 
denominations :  Fifteen  per  cent  and  more,  if  the  holders 
desire,  one  hundred  dollar  bonds,  and  the  remainder  one 
thousand  dollar  bonds. 

Sec.  10.  Be  it  further  enacted.  That  no  part  of  the  public 
debt  shall  be  fiyided,  paid  or  received,  except  as  provided 
in  this  Act,  and  all  laws  providing  any  other  mode  or 
manner  of  funding  the  debt  be  and  the  same  are  hereby 
repealed. 

Sec.  12.  Be  it  further  enacted.  That  when  there  is  a  sur- 
plus in  the  Treasury  not  needed  for  the  payment  of  the 
interest  on  bonds  funded  under  this  Act  nor  for  the  current 
expenses  of  the  State,  the  Comptroller  shall  call  for  the 
redemption  of  bonds  bearing  the  highest  rate  of  interest, 


APPENDICES.  313 

which  shall  be  taken  uj)  and  jjaid  off  to  the  extent  of  the 
surplus. 

Sec.  13.  Be  it  further  enacted,  That  when  a  bond  is 
called  for  redemption  by  number  the  interest  shall  cease  on 
said  bond  at  the  expiration  of  sixty  days  after  the  call,  and  if 
the  bonds  are  not  all  funded  under  the  provisions  of  this  Act, 
the  Comptroller,  after  calling  in  and  paying  all  the  bonds 
funded  under  this  Act,  paying  those  bearing  the  highest 
rate  of  interest  lirst,  shall  apply  the  surplus  in  the  Treasury 
to  the  purchase  of  the  unfunded  bonds ;  Provided,  that  he 
shall  not  give  a  higher  price  for  any  bonds  not  funded  than 
the  amount  to  which  they  are  entitled  to  be  funded  under 
this  Act.  He  shall  advertise  for  the  bids  at  such  times  as 
he  may  designate,  and  take  the  lowest  bid,  provided  it  is 
not  at  a  greater  rate  or  amount  than  the  holder  of  said  bond 
would  have  received,  provided  it  had  been  funded  under 
this  Act. 

Sec.  14.  Be  it  further  enacted.  That  all  laws  and  parts 
of  laws  in  conflict  with  the  provisions  of  this  Act  be  and  the 
same  are  hereby  repealed. 

(Approved  March  20,  1883.) 


APPENDIX   VI. 

EXTRACTS  FROM  THE  *'  REPORT  OF  THE  JOINT  INVESTIGAT- 
ING COMMITTEE  ON  PUBLIC  FRAUDS  AND  ELECTION  OF 
HON.  J.  J.  PATTERSON  TO  THE  UNITED  STATES  SENATE, 
MADE  TO  THE  GENERAL  ASSEMBLY  OF  SOUTH  CAROLINA 
AT  THE  REGULAR  SESSION,  1877-78." 

Supplies. 
**  The  committee  respectfully  invite  attention  to  the  evi- 
dence and  vouchers  submitted  with  this  report  under  the 
head  of  '  Supplies.'    The  abuses  have  been  so  great  and  of 
such  a  palpable  nature  that  the  most  credulous  person 


314  APPENDICES. 

would  hardly  believe  that  such  frauds  could  be  perpetrated 
under  the  forms  of  legislation.  History  fails  to  cite  an 
instance  which  can  be  compared  with  such  a  carnival  of 
fraud  and  extravagance  as  has  been  held  in  South  Carolina 
by  and  through  the  purchase  of  supplies  for  the  members 
of  the  General  Assembly." 

"If  the  simple  statement  were  made  that  senators  and 
members  of  the  House  were  furnished  with  everything  they 
desired,  from  swaddling-clothes  and  cradle  to  the  coffin  of 
the  undertaker,  from  brogans  to  chignons,  finest  extracts 
to  best  wines  and  liquors,  and  all  paid  for  by  the  State,  it 
would  create  a  smile  of  doubt  and  derision ;  but  when  we 
make  the  statement,  and  prove  it  by  several  witnesses  and 
the  vouchers  found  in  the  offices  of  the  clerks  of  the  Senate 
and  House,  all  will  with  sorrow  admit  the  truthfulness  of 
this  report." 

*'For  your  guidance  we  deem  it  essential  to  place  under 
appropriate  heads  the  class  of  supplies  and  the  evidence 
referring  thereto." 

Refreshments. 

"  Under  the  class  of  refreshments  we  ask  attention  to 
these  facts :  A  room  in  the  State  House  was  fitted  up  where- 
in to  serve  '  wines,  liquors,  eatables,  and  cigars  to  State 
officials,  senators,  members  of  the  House  and  their  friends, 
at  all  hours  of  the  day  and  night.'" 

"  Not  satisfied  with  the  establishment  of  a  bar  in  the 
Capitol,  they  employed  a  porter  who  had  charge  of  the 
'  refreshment'  room.  The  porter  states  that  for  six  years 
the  State  House  bar-room  was  generally  opened  at  eight 
o'clock  in  the  morning  and  kept  open  until  from  two  to  four 
the  next  morning ;  that  during  that  time  some  one  was  con- 
stantly there  eating,  smoking,  or  drinking,  and  that  Sunday 
formed  no  exception  to  the  rule." 

*'In  addition  to  the  refreshments  furnished  at  the  State 
House,  large  quantities  of  wines,  liquors,  and  cigars,  and 


APPENDICES.  815 

other  things,  were  sent  to  the  hotels,  boarding-houses,  and 
residences  of  State  officials,  senators,  members  and  their 
friends." 

*'  It  will  be  observed  that  the  State  furnished  a  room,  a 
porter,  and  refreshments  for  our  '  statesmen,'  while  they 
were  plotting  how  to  rob  the  people  they  pretended  to 
represent ;  ready  to  vote  for  any  measure  that  would  enrich 
themselves  at  the  public  expense." 

Among  the  articles  purchased  under  the  head  of  supplies 
and  furnished  free  of  charge  to  the  legislators  were  such 
wines  and  liquors  as  Ileidsick  champagne,  sparkling 
Moselle,  imperial  pale  sherry,  best  Madeira,  port  and 
Malaga  wines,  finest  French  cognac  brandy.  Baker,  Bour- 
bon, and  nectar  whiskies,  Jamaica  rum,  etc. ;  the  best  grades 
of  cigars  and  tobacco ;  and  groceries  and  delicacies  of  all 
kinds. 

Furniture. 

**We  find  that  there  has  been  paid  out  within  four  years 
for  furniture  alone  over  two  hundred  thousand  dollars,  and 
of  this  amount  Mr.  Berry  and  Mr.  Fagan,  furniture  dealers, 
testify  tliat  at  the  present  time  there  is  at  the  State  House 
only  seventeen  thousand,  seven  hundred  and  fifteen  dollars 
worth,  appraised  at  the  prices  charged  for  it,  a  list  of  which 
was  sworn  to  by  them  and  is  attached  to  their  evidence.  .  .  . 
Mr.  Berry  remembers  furnishing  the  rooms  occupied  by 
W.  J.  Whipper  and  others,  and  some  of  the  rooms  he 
furnished  as  often  as  three  times;  he  traded  furniture  to 
members  for  pay  certificates,  and  furnished  almost  all  the 
offices  in  the  State  House  every  session !  In  continuation 
he  states  that  he  furnished  at  least  forty  bedrooms,  but 
does  not  know  who  occupied  them  all  or  what  became  of 
the  furniture." 

*'  It  is  no  longer  a  matter  of  surprise  to  your  committee 
that  members  who  only  receive  six  dollars  per  diem  could 
in  a  few  weeks  after  their  arrival  in  Columbia  obtain  ele- 
gant furniture  for  their  rooms,  Brussels  carpets  for  the 


316  APPENDICES, 

floors,  and  recline  on  Oriental  springs  and  sponge  mat- 
tresses, while  their  constituents  were  being  hounded  down 
by  the  inexorable  tax-gatherer  to  pay  the  price  of  these 
luxuries." 

Jewelry,  etc. 

'*  We  cannot  refrain  from  commenting  upon  the  large 
accounts  of  Mr.  Isaac  Sulzbacher,  a  well-known  jeweler 
of  Columbia,  and  call  especial  attention  to  accounts  desig- 
nated as  Nos.  27  and  B  5." 

Among  the  articles  mentioned  in  the  various  accounts 
presented  in  the  report  are  gold  watches  and  chains,  rich 
sets  gold  jewelry,  diamond  rings  and  pins,  gold  lockets, 
charms,  finger  rings,  necklaces,  pencil  cases,  pens,  breast 
pins,  ivory  handled  knives  and  forks,  pen  and  pocket 
knives,  teaspoons,  tablespoons,  forks,  call  bells,  rich  toilet 
sets,  pocket  pistols,  cuckoo  clocks,  extra  fine  Belgian  mar- 
ble mantel  clocks,  French  China  vases,  ladies'  fine  work 
boxes,  etc. 

Lists  equally  long  are  furnished  in  the  report  under  the 
head  of  crockery  and  glassware,  printed  matter,  stock  (fine 
horses,  mules,  carriages,  buggies,  harness,  etc.),  and  sun- 
dries. 

The  remainder  of  the  report  describes  various  frauds 
committed  under  the  head  of  "Public  Printing,"  "Pay 
Certificates,"  "  Hardy  Solomon's  Claim,"  "  The  Swindle 
of  the  Greenville  and  Columbia  Railroad  Company,"  "  The 
Impeachment  Swindle,"  "  Blue  Ridge  Railroad  Scrip, 
Validating  Act,  and  Financial  Settlement,"  "  Ku  Klux 
Rewards,"  etc.,  "  Penitentiary  and  Orphan  Asylum 
Frauds,"  "  Sinking  Fund  Frauds,"  etc.,  and  "  Election  of 
Hon.  John  J.  Patterson  to  the  United  States  Senate." 

The  whole  report  covers  nine  hundred  and  thirty-seven 
large  octavo  pages. 


INDEX. 


INDEX. 


Act  authorizing  bonds  for  redemp- 
tion of  bills  receivable  of  the 
State  of  South  Carolina,  79 ; 
authorizing  loan  to  pay  inter- 
est on  public  debt  of  South 
Carolina,  79;  autliorizing  loan 
for  funding  bills  of  Bank  of 
State  of  South  Carolina,  80; 
authorizing  aid  to  Blue  Ridge 
Railroad,  80 ;  for  relief  of 
treasury  of  South  Carolina, 
81;  creating  office  of  Land 
Commissioner  in  South  Car- 
olina, 81;  authorizing  "con- 
version bonds "  of  South 
Carolina,  81;  pledging  State 
bonds  of  South  Carolina  as 
security  for  loans,  82;  creat- 
ing sterling  funded  debt,  82; 

declaring  certain  bonds  and 
stocks  valid,  86;  authorizing 
increase  of  Louisiana's  debt 
between  the  years  1865-70, 108. 

of  Alabama,  authorizing  levy 
of  a  tax  for  purchase  of  State 
bonds,  59;  increasing  rate  of 
taxation  fiftv  per  cent,  60; 
"  4,000  per  mile  act,"  60. 

of  final  settlement  of  Virginia's 
debt,  IW,  195,  196. 

of  Michigan  for  the  adjustment 
of  her  loan,  162,  163. 

of  Tennessee,  which  settled 
the  debt  controversy,  149-151; 
funding  interest,  1.34,  i:{7  ;  pro- 
viding for  retirement  of  State 
bonds,  135;  authorizing  ap- 
pointment of  a  special  rail- 
road commission,  135. 

of  Georgia,  making  r«'gistration 
of  bonds  a  condition  of  their 
validity,  104,  105. 

supplemental  to  the  charter  of 
the  Mississippi  Union  Bank, 
34,  35,  280,  281. 


Acts  creating  debt  of  Tennessee, 
131. 

passed  for  relief  of  banks  in 
Alabama,  55. 

of  Tennessee  providing  for  sale 
of  delinquent  railroads,  135, 
136. 
Alabama  and  Chattanooga  Railroad 
Company,  failure  to  pay  in- 
terest on  bonds,  59;  becomes 
a  possession  of  the  State,  59; 
final  settlement  of  bonds  is- 
sued in  aid  of,  61,  62;  indorse- 
ment of  bonds  of,  by  State  of 
Georgia  declared  illegal,  104. 

bank  of,  54. 

constitutional  provision  relative 
to  internal  improvements,  61. 

financial  difficulties  after  the 
war,  55,  56;  railroad  bonds 
indorsed  by,  57-59. 

Florida  and  Georgia  Railroad's 
connection  with  Bank  of  Pen- 
sacola,  47. 

liability  of,  on  account  of  rail- 
roads, 68,  59;  laudable  at- 
tempts to  meet  lier  obliga- 
tions, 59,  60. 

suits  against,  28. 
Amendment  to  constitution  of  Ar- 
kansas  establishing  repudia- 
tion, 127. 

to  constitution  of  Minnesota 
relating  to  railroads,  152,  153, 
155,  158;  declared  unconstitu- 
tional, 160. 

to  Louisiana's  constitution  lim- 
iting the  amount  of  the  debt, 
109. 
Amendments  to  act  chartering 
Southern  Life  Insurance  and 
Trust  Company,  49. 
American  Bank  Note  Company, 
bonds  printed  for  South  Caro- 
lina, 83. 


319 


S20 


INDEX. 


Arguments  favoring  repudiation  of 
Union  Bank  bonds,  37,  38. 

Arkansas,  population  of,  in  1836, 
119;  ambition  of,  119;  bank 
of,  119;  Keal  Estate  Bank  of, 
119;  debt  of,  incurred  for 
banks,  120;  funding  act  of, 
120,  121;  credit  of,  loaned  to 
railroads,  121 ;  borrows  money 
for  current  expenses,  122; 
amount  of  repudiation  in,  127; 
suit  against,  28. 

Assessed  valuation  of  property  in 
Arkansas,  123. 

Assessment  returns,  diminution  of, 
in  Tennessee,  140,  141. 

Assumption  of  State  debts  by  the 
United  States  as  a  remedy 
for  repudiation,  250-253. 

Atlantic  and  Gulf  Railroad,  98. 


Bainbridge,  Cuthbert,  and  Colum- 
bus Railroad,  indorsement  of 
bonds  for,  by  the  State,  100. 

Bank  capital  authorized  from  1833- 
38,  30. 
of  Alabama,  54;  suspends  spe- 
cie payments,  55 ;  responsibil- 
ity of  State  for  bills,  55. 
of  Pensacola,  when  chartered, 
47;  authorized  to  increase  its 
capital,  47;  purchases  stock  in 
Alabama,  Florida,  and  Geor- 
gia  Railroad,  47;  short  life  of , 
47,  48. 
of  State  of  Arkansas,  119. 
of  State  of  South  Carolina,  80 ; 
of  Tennessee,  1.33. 

Bankruptcy  of  States,  how  it  should 
be  treated,  261-263. 

Banks,  rapid  increase  in  capital  of, 
previous  to  1837,  224. 

Biddle,  Nicholas,  35. 

Bill  of  Minnesota  legislature  pro- 
viding for  exchange  of  land 
for  bonds,  157. 

Blue  Ridge  Railroad,  aid  granted 
by  South  Carolina,  80;  failure 
to  pay  interest  on  State  bonds, 
80. 

Board  of  Finance  of  Arkansas,  123; 
of    Liquidation    of    Louisiana, 
112;  difficulties  encountered, 
112,  113. 

Bondholders  of  New  York  protest 
against  funding  act  of  Lou- 
isiana, 1 12. 

Bonds,  illegality  of,  as  a  cause  of 
repudiation,  200-211. 
issued  in  aid  of   railroads   by  j 
Tennessee,  13:i. 


Bonds,  in  aid  of  banks  in  Florida, 
43-51;  opinions  of  lawyers 
concerning  their  validity,  46. 

for  Planters'  Bank,  41. 

for  Union  Bank  of  Mississippi, 
33,-34;  sale  of,  35. 

by  North  Carolina.  See  North 
Carolina. 

loaned  by  Arkansas  to  railroads, 
121. 

of  Alabama  issued  to  meet  gen- 
eral expenses,  66;  to  meet  de- 
ficits, 66;  most  troublesome 
portion  of  debt  of,  56. 

of  Arkansas  issued  for  redemp- 
tion of  floating  indebtedness, 
123. 

of  Georgria,  intended  to  be  ex- 
changed for  outstanding  obli- 
gations of  Central  Bank 
declared  illegal,  105. 

of  Louisiana  declared  "  ques- 
tioned and  doubtful,"  113. 

of  Louisiana  authorized  by  the 
legislature  of  1870,  108. 

printed  by  American  Bank  Note 
Company  for  South  Carolina, 
83. 
Brunswick  and  Albany  Railroad, 
100;  indorsement  of  bonds  by 
State  declared  null  and  void, 
102. 
Bullock,  Governor  of  Georgia,  99, 
100. 

Caldwell,  Governor,  statement  con- 
cerning sale  of  bonds,  70. 

Call,  Governor,  opposition  to  repu- 
diation, 46. 

Campbell,  Justice,  on  the  eleventh 
amendment,  11, 12. 

•'  Carpet  bag  "  rule  in  Georgia,  99. 

Cartersville  and  Van  Wirt  Railroad, 
100;  indorsement  of  bonds  by 
State  declared  null  and  void, 
101. 

Causes  of  the  increase  of  Tennes- 
see's debt,  133. 

Central  Bank  of  Georgia,  bonds  to 
be  exchanged  for  outstanding 
obligations  of,  105. 

Certificates  of  Southern  Life  Insur- 
ance and  Trust  Company,  49. 

Charges  against  Tennessee  bonds 
made  by  repudiators,  147,  148. 

Charter  of  Union  Bank  of  Mis- 
sissippi, described,  33,  34; 
quoted,  278,  280. 

Charters  of  banks  granted  from 
1833-38,  :{0. 

Chatham  Itailroad,  bonds  issued  to, 
09. 


INDEX. 


B21 


Cherokee  Valley  Railroad,  100;  in- 
dorsemeut  of  bonds  by  State 
declared  null  and  void,  102. 

Circuit  Court  at  Little  Kock,  de- 
cision concerning  railroad  aid 
bonds,  125. 

Compromise  Act  on  North  Carolina 
debt,  76,  77,  78. 

Civil  War,  influence  of,  on  the 
Southern  States,  230-233 ;  as  a 
cause  of  repudiation,  230-236; 
reduced  taxable  valuation  of 
Southern  States,  230;  in- 
creased debts  of  Southern 
States,  231 ;  destroyed  idea  of 
State  sovereignty,  232. 

Commissioners  for  adjustment  of 
the  Alabama  debt,  00,  61. 

'•  Consolidation  Act"  of  South  Car- 
olina, 87,  88. 

"  Consolidated  bonds "  of  Louisi- 
ana, 112. 

"Consolidation  bonds"  of  Louisi- 
ana, constitutional  amend- 
ment concerning,  118. 

"  Consolidation  bonds "  of  North 
Carolina,  74,  75. 

Constitutional  convention  of  1879 
(Louisiana),  115. 

Constitution  of  Arkansas,  amend- 
ment authorizing  repudiation, 
127. 
of  Georgia,  amendment  estab- 
lishing repudiation,  106,  107. 
of  Mississippi,  article  for  the  pre- 
vention of    hasty  legislation, 
.34 ;  article  repudiating  debt,  43. 
of  the  United  States,  a  serious 

defect  in,  249,  250. 
of  the  United  States,  articles 
relating  to  repudiation,  4; 
what  protection  does  it  afford 
to  defrauded  State  creditors, 
22. 

"Contract  clause,"  Justice  Strong 
on,  8;  interpretation  of,  sum- 
marized, 9;  ways  in  which  it 
may  be  violated,  7,  8;  quoted, 
4 ;  meaning  of,  5-9. 

Contracts,  kinds  of,  referred  to  in 
the  "  contract  clause  "  of  the 
Constitution,  5,  6. 
obligation  of,  6. 

"  Conversion  bonds"  of  South  Car- 
olina, 81 ;  tax  for  payment  of, 
86. 

Corruption  in  South  Carolina,  219, 
220. 

"  Coupon  cases  "  of  Virginia,  186, 
187,  190,  191. 

"  Coupon-killer,"  acts  of  Virginia, 
182,  183,  184. 


Coupons  of  Virginia  bonds,  attack 
upon  the  tax-receivable  char- 
acter of,  171 ;  attempts  to  tax, 
172,  173,  174;  other  attempts 
to  invalidate,  189. 

Credit  of  States,  how  injured  by  re- 
pudiation, 211-214. 

Crisis  of  1837,  226-229. 

Currency  and  gold  bonds  of  Geor- 
gia repudiated,  103. 

Curtis,  Judge,  on  condition  of  the 
country  in  the  thirties,  223, 
225.  226. 


Davis,  C.   K.,  message  to  Minne- 
sota   legislature    concerning 
railroad  bonds,  158. 
Debt  commission  in  North    Caro- 
lina, 76. 

contingent  of  Tennessee,  132; 
debt  proper,  132, 133 ;  increase 
of,  in  decade  1861-71,  133; 
diminution  of,  136. 

of  Alabama,  tinal  settlement  of, 
61-63. 

of  Arkansas  incurred  in  aid  of 
banks,  120. 

of  Louisiana  before  the  Civil 
War,  107;  increase  of,  during 
Civil  War,  107;  doubled  from 
1865-70,  108;  increase  in  1871, 
109. 

of  North  Carolina.  See  North 
Carolina. 

of  South  Carolina,  confusion 
concerning,  82,  83. 

of  repudiating  States,  magni- 
tude of,  215-217. 

ordinance  of  Louisiana,  115, 
116;  objections  to,  116,  117; 
decision  of  the  Supreme 
Court  concerning,  118. 

settlement    act    of    Tennessee, 
306-313;  of  Virginia,  2'.)0-.301. 
Decision  of  Arkansas  courts  con- 
cerning railroad   aid    bouds, 
125. 

of  Florida  courts  on  validity  of 
railroad  aid  bonds,  53. 

of  High  Court  of  Errors  of 
Mississippi  relative  to  Union 
Bank  bonds,  39,  40. 

of  I^iouisiana  courts  relative  to 
bonds,  110,  114. 

of  South  Carolina  courts  con- 
cerning legality  of  bonds,  91, 
92. 

of  the  Supreme  Court  of  the 
United  States  regarding  tax- 
receivable  character  of  Vir- 
ginia coupons,  174,  175. 


322 


INDEX. 


Decision  of  the  Supreme  Court  on 
the  "  debt  ordinance  "  of  Lou- 
isiana, 118. 
of  the  United  States  Court  of 
Tennessee  on  the  debt  contro- 
versy, 146;  of  Circuit  Court, 
148. 

Deficits  in  Louisiana  interest  pay- 
ments, 114,  115. 

"  Delano  Bill "  of  Minnesota,  157. 

Education  as  a  remedy  for  repudia- 
tion, 263,  264. 

Eleventh  amendment  to  the  Con- 
stitution quoted,  11;  inter- 
pretation of,  by  the  Supreme 
Court  of  the  United  States, 
12-22;  summary  of  its  rela- 
tions to  defrauded  State  credi- 
tors, 22. 
repeal  of,  as  a  remedy  for  repu- 
diation, 253-260;  advantages 
of,  257;  practical  objection  to 
its  repeal,  260. 

Expenditures  of  Louisiana,  increase 
of,  over  income  in  1870, 108. 

Failure  of  compromise  acts  in  Ten- 
nessee, effect  upon  the  bond- 
holders, 146. 

Finance  Reports  of  Florida,  state- 
ments concerning  deficits,  62. 

Financial  condition  of  Tennessee 
from  1874-78,  138-142. 

Florida,  amount  of  bonds  repudi- 
ated, 54. 
Central   llailroad,  bonds  issued 

in  aid  of,  51. 
Courts,  decision  of,  on  railroad 
aid  bonds,  63  ;  finance  reports 
on  deficits,  52;    internal  im- 
provements, acts  of,  50,  61. 
railroads    default    in    interest 

Eayments,  61. 
es  possession  of  defaulting 
railroads,  62. 
Forest  culture  in  the  United  States, 
need  of  State  loans  for,  243, 
244. 
Fourteenth  Amendment,  its  effect 

on  tlie  Southern  States,  233. 
Fraud  in  State  securities  of  South 
Carolina,  popular  impression 
concerning,  85,  86. 
Funding  Act  of  Alabama,  61-63. 
of  Arkansas,  120,  121. 
of   Louisiana,    112;  dissatisfac- 
tion with,  114,  115. 
Acts  of  North  Carolina  of  March 
10,  1866,  and  Aug.  20,  1868,  68. 
Acts  of  Tennessee,  134,  137,  138. 


Georgia,  use  of  State  credit  for  in- 
ternal improvements,  97,  98; 
constitutional  provision  pre- 
scribing conditions  under 
which  aid  can  be  granted  to 
corporations,  98;  decision  con- 
cerning indorsement  of  bonds 
for  liainbridge,  Cuthbert,  and 
Columbus  Railroad,  100, 101. 

indorsement  of  bonds  for  Car- 
tersville  and  Van  Wirt  Rail- 
road declared  null  and  void, 
101 ;  same  for  Cherokee  Rail- 
road, 102;  same  for  Brunswick 
and  Albany,  102;  same  for 
Macon  and  Brunswick,  103; 
same  for  Alabama  and  Chat- 
tanooga, 104. 
Governor  of  Georgia  declares  State's 
indorsement  of  the  bonds  of 
the  Macon  and  Brunswick 
Railroad  illegal,  103,  104. 

of  Mississippi  vetoes  bank  char- 
ters, 36;  communication  con- 
cerning Union  Bank  bonds, 
.36,  37. 

of  Tennessee,  message  of,  in 
1875,  139. 

Hamilton,  Alexander,  opinion  con- 
cerning the  judicial  power  of 
the  United  States,  10. 

Henry,  Patrick,  opinion  concerning 
the  judicial  power  of  the 
United  States,  10. 

Hermitage,  the,  133. 

Higher  education,  need  of  State 
loans  for,  245,  246. 

Holden,  Governor,  messages  in 
1870,  70;  article  of  impeach- 
ment against,  72,  note. 

"  Holford  bonds  "  of  Arkansas,  124, 
126,  127. 

Hope  &  Co.  of  Amsterdam,  letter 
received  from  the  Governor 
of  Mississippi,  37. 

Illegality  as  a  cause  of  repudiation, 

200-211. 
in  bonds,  kinds  of,  201. 
of  South  Carolina  bonds,  89,  91, 

92. 
Illegal  character  o    certain  bonds 

of    Arkansas,    Georgia,  and 

South  Carolina,  200. 
Illinois,  suits  against,  28. 
Indiana,  method  of  bringing  suits 

against,  25. 
Indorsement  of  Georgia  on  bonds 

of  railroad  declared  null  and 

void,  100. 
Information,  sources  of,  265-274. 


INDEX. 


323 


Internal  improvements,  act  of 
Tennessee,  U\,  SOl-TO?. 

Irrigation,  need  of  State  loans  for, 
244,  245. 

Jackson,  President,  specie  circular, 
35. 

Jacksonville,  Pensacola,  and  Mobile 
Railroad,  State  bonds  issued 
in  aid  of,  51. 

Joint  Investigating  Committee  on 
public  frauds  of  South  Caro- 
lina, 219,  220. 

Judiciary  Committee  of  Territorial 
legislature  of  Florida,  resolu- 
tions of,  on  the  bond  question, 
45,  46. 

Judicial  power  of  the  United  States, 
dehnition  of,  in  the  Constitu- 
tion as  first  adopted,  4  ;  inter- 
pretation of,  by  Supreme 
Court,  10  ;  differences  of  opin- 
ion concerning,  10;  opinions 
of  Patrick  Henry,  Madison, 
and  Marshall  concerning,  10. 

Kennedy,  P.  T.,  bonds  issued  in  aid 
of,  113. 

"  Land  Bond  Bill "  of  Minnesota, 
157. 

Land  Commissioner  of  South  Caro- 
lina, 81. 

Legislative  Council  of  Florida, 
opinion  concerning  repudia- 
tion, 46,  47. 

Legislature  of  Georgia  declares 
divers  bonds  illegal,  104. 

Levee  bonds  of  Arkansas  declared 
illegal,  125,  126. 

Levees  of  Arkansas,  bonds  issued 
for  construction  of,  122. 

Loan  authorized  by  Michigan  for 
public  improvements,  161. 
of  Tennessee  to  meet  temporary 
obligations,  failure  of,  139. 

London  bondholders  protest  against 
Louisiana  funding  act,  113. 

Louisiana  and  the   United    States 

government,  110;  appeal  of,  to 

the  courts  to  avoid  payment 

of  bonds  and  coupon.s,  110. 

compromise     of,     with     bond- 

holdi-rs,  118,  119. 
constitutional  convention  of,  in 

1879,  115. 
debt  of,  before  the  Civil  War, 

107. 
funding  act  of  1874,  112. 

Macon  and  Brunswick  Kailroad,  in- 
dorsement of,  bonds  of,  by  the 
State  declared  illegal  bv  Gov- 
ernor of  Georgia,  103,  104. 


McCulloch  bill,  178, 179, 180,  281-285. 

Madison,  James,  opinion  concern- 
ing the  judicial  power  of  the 
United  States,  10. 

Marshall,  Justice,  opinion  concern- 
ing the  judicial  power  of  the 
United  States,  10;  on  the 
eleventh  amendment,  13,  14, 
15. 

Michigan  defaults  in  her  interest 
payments,  162;  suits  against, 
28. 

Minnesota,  grant  of  land  to,  for 
railroad  purposes,  152;  rail- 
roads, aid  granted  to,  152, 
153;  State  railroad  adjust- 
ment bonds,  160. 

Mississippi  and  Mexican  Gulf  Ship 
Canal,  bonds  issued  in  aid  of, 
113. 
the    first    State    to    repudiate 
bonds,  33. 

Mobile  and  Chattanooga  Railroad, 
114. 

Monopolies,  State  ownership  of,  245. 

Morris  Canal  and  Banking  Com- 
pany, made  agent  for  con- 
tracting a  loftn  for  Michigan, 
162. 

Municipal  bonds,  how  payment  of, 
is  enforced,  254,  255. 

Nevada,  suits  against,  27. 

New  Orleans,  bonds  issued  in  aid 
of,  107. 

New  Orleans,  Mobile,  and  Texas 
Railroad,  bonds  issued  to,  by 
State  of  Louisiana,  109. 

North  and  South,  differences  be- 
tween, as  a  cause  of  repudia- 
tion, 234-236. 

North  Carolina,  debt  of,  67-69  ;  debt 
contracted  previous  to  decla- 
ration of  secession,  67;  bonds 
of,  issued  during  the  war  lor 
other  than  war  purposes,  68; 
bonds  of,  issued  after  the  wiir 
in  pursuance  of  acts  passed 
before  the  war,  68  ;  bonds  of, 
issued  under  authority  of 
funding  acts,  68;  special  tax 
bonds,  69. 
experience  with  railroad  stock, 
69;  act  authorizing  exchange 
of  railroad  stock  for  State 
bonds,  73;  suits  against,  28, 
29. 

Penalty  fixed  for  non-payment  of 
the  interest  or  sinking  fund 
of  Tennessee  bonds,  132. 

Pillsbury,  .J  S.,  message  to  Minne- 
sota legislature  concerning 
railroad  bonds,  158. 


324 


INDEX. 


Planters'  Bank,  bonds  issued  for, 
41;  when  chartered,  40;  au- 
thorized capital,  40;  sale  of 
bonds,  41;  sinking  fund  of, 
41; 
bonds,  legislation  concerning,  in 
1848-4y,  4"^;  popular  vote  on, 
43. 

Poindexter  v.  Greenhow,  case  of, 
189,  190,  191. 

Popular  vote  in  Tennessee  on  bill 
for  settlement  of  the  debt, 
145. 

Prohibitions  against  impairment  of 
contracts  contained  in  8tate 
constitutions,  21. 

Proposition  of  Tennessee  bond- 
holders, how  met  by  the  legis- 
lature, 142,  143. 

Propositions  concerning  settle- 
ment of  debt  of  North  Caro- 
lina, 75. 

Protest  of  Mississippi  legislature 
against  repudiation  of  Union 
Bank  bonds,  37. 


Quarterly  gold  bonds  of  Georgia, 
100. 


Railroad  bonds  of  Minnesota,  how 
settled,  1()0,  161. 
commission  of  Tennessee,  135. 
companies  of  Alabama,  aid  re- 
ceived from  the  State,  58. 

Railroads,  aid  granted  to,  by  Geor- 
gia, 99. 
of  Arkansas,  bonds  issued  to,  by 
the  State,  121;  default  in  in- 
terest payments,  121. 
of  Minnesota,  aid  granted  to, 
152,  153;  repentance  of,  154; 
mortgages  on,  foreclosed  by 
the  State,  154, 155. 

Re-adjusters  in  Virginia,  views  of, 
175,  176. 

Real  KstateBankof  Arkansas,  119. 

lleason.s  assigned  for  repudiation  of 
Florida  obligations,  fanciful 
character  of,  60. 

Remedies  afforded  by  States  against 
repudiation,  23-30. 
for  enforcement  of   contracts, 
9-23. 

Repeal  of  the  Eleventh  Amend- 
ment as  a  remedy  for  repudin- 
tion,  253-260 ;  advantages  of, 
257. 

Remedy  for  repudiation,  a,  248;  pro- 
posed by  John  Quincy  Adams, 
248,  249;  proposed  bv  Mr. 
Moore  of  Tennessee,  253,  254.  I 


Report  of  committee  on  public 
frauds  of  South  Carolina, 
313-317. 

of  committee  appointed  by  the 
Governor  of  Louisiana  to  in- 
vestigate the  State  debt,  111. 

of  committee  of  Tennessee  legis- 
lature on  the  debt,  143,  144. 

of  Georgia,  committee  on  bond 
issues  of  the  State,  100. 

of     legislative    committee     of 
South  Carolina  appointed  in 
1871,  84,  85. 
Repudiation  amendment  to  the  con- 
stitution of  Georgia,  106,  107. 

amount  of,  by  Alabama,  63. 

in  Florida,  real  grounds  for,  50. 

in  North  Carolina,  amount  of, 
78 ;  history  of,  67-78. 

injury  of,  to  States,  210-214. 

its  effect  upon  the  national 
credit,  257-260. 

mania  for,  in  Mississippi,  42; 
clause  concerning,  in  consti- 
tution of  Mississippi,  43. 
Resolutions  of  the  General  As- 
sembly of  Tennessee  relative 
to  proposition  of  bondholders, 
142. 

of  the  Mississippi  legislature  on 
sale  of  Union  Bank  bonds,  ,38. 
Restrictions  on  borrowing  power  of 
States,  241,  242;  reasons  why 
they  are  not  to  be  commended, 
24.3-246. 
Riddleberger  act,  180,  181,  182,  185, 

285-290. 
Right  of  individuals  to  sue  State 
officers  when  they  cannot  sue 
States  directly,   17;   does  not 
exist  in  all  cases,  17-21. 

Sale  of  railroads  in  Tennessee  at- 
tempted bv  the  railroad  com- 
mission, 1.36. 

Scrip  of  Arkansas,  122. 

revenue  of  South  Carolina,  80. 

Security  given  Alabama  for  indorse- 
ment of  railroad  bonds,  57. 

Sibley,  Governor  of  Minnesota,  con- 
struction of  railroad  amend- 
ment by,  153. 

Sinking  fund  for  Planters'    Bank 
bonds,  41. 
of  Minnesota  rejected   by  the 

people,  156. 
required  by  the  "4,000  per  mile 
act  "  of  Alabama,  60. 

Sources  of  itif()rmation,  265-274. 

South  Carolina,  debt  before  the  war, 
78;  war  debt  repudiated,  78; 
acts   authorizing  increase  of 


INDEX. 


325 


indebtedness    after    1867,  79; 
confusion     concerning    debt, 
82,  83;  statement  of  officials 
concerning    debt,     83;     debt 
commission  of  1877,  1)0. 
Southern  Life  Insurance  and  Trust 
Company,  48,  49;  certificates 
of,  49. 
Specie  circular  of  President  Jack- 
son, 35. 
Special  Debt  Commission  of  SoMth 

Carolina,  93. 
"  Special  Tax  Bonds,"  69,  71,  72,  74. 
State    constitutions    invalid    in    so 
far  as  they  conflict  with  Con- 
stitution of  the  United  States, 
16;  gold   bonds   of   Georgia, 
100. 
States  classified  from  the  standpoint 
of  their  legislation  relative  to 
the  bringing  of  suits  against 
themselves,  21 ;   general  atti- 
tude of,  on  the  question,  21. 
Statistical  tables,  275-278. 
Suit  against  States,  permission  of,  in 
State  courts  as  a  remedy  for 
repudiation,  260,  261. 
brought  by  New  York  and  New 
Hampshire  against  Louisiana 
in  order  to  compel  her  to  pay 
her  debts,  22,  23, 117, 118. 
Suits  against  Alabama,  28;   against 
Arkansas, 28;  against  Illinois, 
28;   against  Michigan,  28,  29; 
against  Nevada,  27;   against 
NX)rth  Carolina,  28, 29;  against 
Indiana,  25;  against  Wiscon- 
sin, 26,  27;  against  Tennessee, 
28;      against     Virginia,     28; 
against  West  Virginia,  28. 
Summary  of  our  public  law  relative 

to  repudiation,  30. 
Supreme  Court,  interpretation  of 
the  clause  in  the  Constitution 
defining  the  judicial  power  of 
the  United  States,  10;  decis- 
ions relative  to  right  of  indi- 
viduals to  sue  State  officers 
when  they  cannot  sue  the 
States  directly,  17-21. 
interpretation  of  the  eleventh 

amendment,  12-22. 
of  Minnesota,  decision  against 

the  Governor,  153. 
of  the  United  States,  decision 
of,  on  the  "debt  ordinance" 
oi  Louisiana,  118. 

Table  showing  fluctuations  of  State 
securities  from  187?  Xq  J879, 
214.  275. 


Taxation,  increase  of,  for  debt  pur- 
poses in  Alabama,  59,  60. 

in  Arkansas,  rate  of,  123. 

rate  of,  in  Louisiana,  109,  110. 
Tax  of  Tennessee  on  railroads,  140. 

rate  in  South  Carolina,  89. 
Tennessee,  suits  against,  28. 


Unconstitutionality  of  bonds,  203- 
205. 

Unconstitutional  Statelaws  declared 
invalid  by  Supreme  Court,  16. 

Union  Bank  bonds,  repudiation  of, 
recommended  by  the  Gov- 
ernor, 36,  37;  sale  on  credit, 
38;  decision  of  High  Court  of 
Appeals  concerning,  39,  40. 
of  Florida,  charter  described, 
44;  concentration  of  stock  of , 
44,  45;  security  of,  45;  suspen- 
sion of  specie  payments  by, 
45;  failure  to  pay  interest  on 
bonds  lent  it,  45. 
of  Mississippi,  bonds  issued  for, 
33,  34;  conditions  of  the  bond 
issue  for,  33,  34;  act  supple- 
menting the  charter  of,  34, 
278;  difficulties  encountered, 
35,  36;  bad  management  of, 
.36. 
of  Tennessee,  133. 

United  States  Bank  of  Pennsylvania 
guarantees  Michigan's  bonds, 
162. 


Views  held  in  Virginia  regarding 
her  debt,  169,  170. 

Virginia,  debt  of,  in  1861, 167;  fund- 
ing act  of  1871,  168,  169. 
suits  against,  28. 


Webster,  Daniel,  report  on  Florida 
banks,  49. 

Western  and  Atlantic  Kailroad,  98. 

Western  North  Carolina  Kailroad, 
lien  of,  on  the  Florida  Central, 
52,  54;  bonds  issued  to,  68. 

West  Virginia,  controversy  of,  re- 
garding her  share  of  Vir- 
ginia's debt,  168;  suits  against, 
28. 

Williamston  and  Tarboro  Railroad, 
bonds  issued  to,  69. 

Wilmington,  Charlotte,  and  Ruther- 
ford Kailroad,  bonds  issued  to, 
68. 

Wisconsin,  method  of  bringing 
suits  against,  26,  27. 


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